Directory of Major Malls
Directory of Major Malls

Strolling the Agora: “What Impact Will Expected Acquisitions By Large Landlords Have On Leasing?”

This is the topic for the Strolling the Agora column in the February 22nd, 2010 issue of SHOPPING CENTER DIGEST
So, when's it gonna happen? I and another couple of hundred others in this shopping center/retail chain industry have been holding our breath for so long that our faces are turning blue.
Does the following item, from these pages in the last August 17th issue, sound at all familiar? “We've been writing for months now about the larger landlords reducing their debt and positioning themselves to acquire new properties and mortgages from strapped owners forced to sell or liquidate their holdings. So far, few 'large' acquisitions have been made.”
Today, six months later, the situation hasn't changed. Numerous companies and partnerships have been formed since then to acquire distressed properties; some have even made buys, but nothing that will awe or grab major interest.
Except, of course, for the Feb 16 offer by Simon Property Group to acquire financially troubled General Growth Properties for $10 billion.
Rather than foreclose on A properties or even large portfolios, numerous lenders have granted loan extensions. Just this past week, for example, mortgage holders did this for the $550 million debt on Pyramid Co's very successful Palisades Center, just a few minutes from us in West Nyack, NY; this was its fourth extension.
“Observers And Mavens”
I'm not even going to touch on the numerous “observers and mavens” who state foreign investors still consider US properties provide the best opportunities for capital appreciation – especially strong interest from Canadian operators, not least of which is RioCan. Or that the REITs are flush with cash and have few opportunities to spend, or desire at current prices: Kimco, DDR, Regency, for instance, though many
REITSs did have a rocky road in the last quarter.
Let's look at this a lot closer to our main concern: If this logjam ever breaks and the large landlords in this business get even larger, what impact will it have for future leasing and dealmaking? To the more nervous and paranoid tenants, “It'll keep rents up and make it more difficult to close a deal, especially if these behemoths are dominant in key markets,” said one national apparel chain.
To another leading specialty tenant, “Not a hell of a lot. I will always have alternative options and we will not return to some of our past errors where we overpaid on rents in the mistaken belief we were protecting our market share.”
In considering grocery-anchored strip and community centers – which many landlords and tenants still consider the most reliable and recession-proof part of our universe – strong regional chains such as discount-oriented dollar and grocery stores, pet foods and supplies, fast-food restaurants, and the like, hobbies, arts and crafts, drugs, here is where they are focusing most of their attention for growth.

Competing Landlords
Perhaps the main concerns expressed about further acquisitions from giant owner-developers are from competing landlords. One felt that larger owner-developers have deeper pockets, are able to spend more on marketing and advertising their shopping centers, and can also bundle deals to prospective tenants, negotiating five, six, or even more leases at one time. “In a specific market, or even a large region, they can
offer special deals to retailers so rents, distribution, advertising and the like would reduce these overall costs proportionally. This would force us to reduce rents to below the market rate.”
“There's no question, also,” said another dealmaker, “a national retailer can visit the home office of a top developer and through scheduled video conferences talk to its leasing representatives around the country to do a lease or iron out details. In cases like this, size does make for more efficient use of time and can reduce
overall costs for both tenant and landlord.”
But yet, contended a local shopping center developer, “We know the specific market better, and can react much more quickly because we don't have as many levels and approvals. This is true at any of the regional ICSC dealmaking events, for example; you rarely find the top leasing people from the giant landlords even attending for that personal contact.”
Whether it's the 800-lb gorilla or the nimble sportscar – hey, sometimes you have to stretch for the appropriate analogy – there's much to be said for both extremes.
What's certain, however, as we and others have said, in the current economy, no one is forced to make a deal. Landlords are more agreeable to make concessions – reduce rents and terms of leases, for example – and retailers are considering new locations and opportunities that were not available just a year or two ago.

Further information on Shopping
Center Digest
, our weekly Eflash, Expanding Retailers,
and the annual Directory of Major Malls may
be obtained from our website,

Strolling the Agora was a twice-monthly column discussing trends, issues of importance, and commentary on the leasing/development aspects of the shopping center/retail chain industry in the US and Canada. Called Strolling the Agora, it was a part of Shopping Center Digest, a newsletter founded in 1973 published until September 2010. The column provided expert insight into various retail focused topics. It was primarily authored by Murray Shor, Editor & Publisher as well as industry and veteran retail experts.  A smattering of archived columns are presented here for your reading “pleasure”. It's an interesting “look back” at what were current hot topics at the time with regard to shopping center/retail industry focus, development and leasing expansions and processes, retail mix, opinions and more.
About Murray Shor:
Reporting and writing on the shopping center/retail industry since the late ’60s. Began as editor at Chain Store Age, founded Shopping Center World (now Retail Traffic), Shopping Center Digest “The Locations Newsletter” in 1973, and the Directory of Major Malls in 1979. Each issue of Shopping Center Digest contained a column called Strolling the Agora which provides commentary on trends, activity, issues of concern to development and leasing in the shopping center/retail industry.
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