When the recession/depression started a few years back, I predicted that there would be a significant increase in business for discount retailers and club stores such as Costco and 99 Cent Stores. Really didn't take a genius to figure that out. As many of us already know that over the last few years, Dollar Tree and 99 Cent Stores now have access to shopping centers that would not have considered them years earlier. My question is, how long are these leases and what will happen when the economy improve?
For the discounters picking up leases in more desirable locations and centers in today's market, my assumption is that they are signing leases at a highly discounted lease rate and a long enough term to secure the location for the foreseable future, (10 years or more). Certainly, as the retailer, I would be locking in today's rate for as long as I could and if the market changed such that the store no longer generated the desirable revenue, you could always turn it back to the landlord, or, if adequatly negotiated, sublease or assign it. In today's market, it is a no-lose situation for these retailers. It's a lot like doubling down when your dealt a 5 & 6 and the dealer is showing a 6!
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