Trending in retail real estate: Keeping your property leased at high rents with quality tenants

Regarding what's happening in retail real estate today, to borrow from Bob Dylan, "The times, they are a changin." Traditional retail is harder to come by, there are increased pressures coming from online shopping sites, municipalities are introducing new challenges, and there is an increased emphasis on energy savings and sustainability. All of these factors must be addressed and can be leveraged to enhance the value of a retail property owner's asset. We're seeing more activity from service-related retailers such as restaurants, gyms, medical use such as urgent care, and beauty service providers. Since these tenants often require variances or special permits, it is much more difficult to lease the space. In New York City, for example, securing a gym as a tenant requires special permits which can take a long time. In the suburbs, the parking requirements for gyms and, especially, restaurants are far greater than for traditional dry retail. This limits the number of tenants to which a given property can be leased. Or, if a landlord is able to obtain a variance to satisfy the required parking condition, there is a longer time-frame involved and higher costs. Furthermore, much of Suffolk County lacks sewers so that increased water use generated by restaurants and medical use require very costly septic systems and limit the amount of property that may be developed. If, however, an owner decides to make the s investment in time and money to accommodate these uses, it can greatly increase the value of one's property as a result of the greater flexibility in leasing and the potential for higher rents. There is no question that online shopping is a competitive force facing brick and mortar retailers. Anecdotally, virtual retailers have definitely eliminated some categories of physical retailers such as video, music and soon, probably, book stores. Competition from e-commerce sites also has caused some retailers to market some merchandise online and therefore reduce the amount of space they want to lease. For many retailers, it's about finding a balance between selling online and through their stores. For retail property owners and their managers, keeping their properties in good shape and structurally sound, with great curb appeal, clean parking areas, and a good tenant mix is critical. It's also important to understand who the consumers are based on a shopping center's or stores' location and whether the property is a regional property or local property so that the right tenants can be targeted. Regional properties generally benefit from national or strong regional tenants with strong drawing power from a larger trade area. Local centers rely on retailers where shoppers from the immediate trade area shop on a regular basis, such as supermarkets, pet food stores, gyms, drug stores and banks. Municipalities, in their efforts to revitalize their downtown areas or shopping districts, are mandating that certain aesthetic and design standards be met. Unfortunately, in some instances, you have municipal boards whose members are regulating these requirements, but who have limited if any architectural or planning experience. Many of these boards are populated by wannabe architects and city planners.They have no idea of building material costs or what retailers want for their stores, which often is very subjective. It becomes a very protracted process and an example of government central planning interference. My opinion is that if a tenant believes its store can be successful in a particular location and the landlord wants to make a deal with that prospective tenant, the local government should not interfere with this commerce. Let the shoppers vote with their wallets. Given today's economy, many retailers are opting to renovate their existing space rather than search out new locations. Well-designed tenant improvements to a property generally are good for both the tenant and the property owner, leading to more shoppers, higher sales, better margins, stronger existing tenants, and more and better tenants to choose from in filling vacancies. These improvements also extend to energy-related improvement, for example, high efficiency common lighting on timers, energy efficient HVAC, enhanced security systems, and well-insulated roofs to keep utility bills low. For all the changes in retail real estate, the name of game remains keeping your property leased at high rents with quality tenants. Jeffrey Pliskin, Esq., is the president of Pliskin Realty & Development, Inc., Garden City, N.Y.