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Colliers International Retail Leasing Guide 2010


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Colliers International Retail Leasing Guide

Colliers International Retail Leasing Guide

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  • 1. Retail Leasing Guide MAKING YOUR SPACE A COMPETITIVE ADVANTAGEColliers International Retail Leasing Guide P. 1
  • 2. THE RETAIL LEASING GUIDEThis guide has been assembledto reflect Colliers International’sknowledge of the retail leasingprocess. Inside is informationon signage, displays, shoppingcenter definitions, common leasingconsiderations, and industrytrends. You’ll also find tips to helpmake customers’ time in line morecomfortable—and more profitable.P. 2 Retail Leasing Guide Colliers International
  • 3. Contents>4 INTRODUCING OURSELVES >7 THE RETAIL LEASING PROCESS > 10 WORD ON THE STREET About Colliers International Taking your requirement from Glossary of Terms notion to motion>5 GETTING STARTED > 12 SHOPPING CENTER DEFINITIONS Making educated decisions about >8 RETAIL LEASING TRENDS your business space What influences the market today > 14 RELOCATION CHECKLIST A step-by-step guide>6 GREAT SIGNAGE >9 CUT THE QUEUE Follow these eight rules Tips to make lines shorter and more profitableColliers International Retail Leasing Guide P. 3
  • 4. Allow Us toIntroduce OurselvesABOUT COLLIERS INTERNATIONALWHO IS COLLIERS INTERNATIONAL? WHY ENGAGE OUR SERVICES?We are an award-winning team of retail leasing Colliers International professionals are equipped with Working with Colliers International professionals savesprofessionals with intimate knowledge of the local, the skills, knowledge and tools to intelligently assess you the time and confusion of dealing with multipleregional and global leasing markets. We bring an your space requirements. We ensure that your leasing agents, landlords or understanding of business needs and the decision—whether to stay or relocate—is informed by Our comprehensive database contains informationleasing process. both your business needs and a thorough market on every retail listing, agent and landlord, providing evaluation.We are committed to creating a business solution that exhaustive data about every opportunity that fits yourmeets your organization’s needs—now, and in the Colliers International’s culture of knowledge-sharing requirements.future. Your retail space is more than just an address; gives you access to experts in real estate management Our market knowledge provides forward-lookingit is where you make business objectives a reality. services, project management, appraisal and valuation, analysis to help you take advantage of trends, and we and capital markets. offer a single point of accountability for your project to connect all of the specialists available to serve you. We are committed to accelerating your success.P. 4 Retail Leasing Guide Colliers International
  • 5. Getting StartedMAKING EDUCATED DECISIONS ABOUT YOUR BUSINESS SPACEWHAT ARE MY OPTIONS? for improved sales. Additionally, market Tenant Improvement Costs process; larger organizations should plan for conditions may create cost benefits supporting Your entry and exit strategy to a lease can even more lead time.Renew the business case for relocation. greatly affect the real cost of your commit-If your current space satisfies your business ment. Store design and tenant improvementneeds, but you are approaching the end of your Brand Value Enhancement WHOM SHOULD I INVOLVE? costs should be viewed as an organizationallease, you may wish to consider renewing The quality of your building or shopping opportunity. Your internal steering committee should beyour lease. First, confirm that the space is center and adjacent tenants speak volumes led by a senior employee or regional realavailable, then negotiate a new lease with about your organization. A renovated store estate manager, depending on your businessthe building owner through your leasing can strengthen your brand in the minds of WHEN SHOULD I START? structure. It should involve decision-makersrepresentative. customers and employees. Plan, plan, plan. Whether you decide to and influencers including purchasing,Relocate renew or relocate, knowledge is key. distribution, marketing, customer research,The expiration of your lease could present HOW MUCH WILL IT COST? human resources, IT, divisional heads and Allow sufficient time to evaluate youran opportunity. A new space could help staff. A single point of contact from your Operational Costs current situation, review options, assess theyou evolve your brand image and attract organization, matched with a single point The negotiation of rent and tenant incentives marketplace context, and negotiate with yournew customers. of contact at Colliers International, is ideal is dependent on the dynamics of your local current landlord to optimize the end result. to make the process run smoothly. market. In certain markets, the development TimingWHY SHOULD I RELOCATE? cycle has created higher vacancy, which You may wish to conduct a survey of your The lease negotiation and relocation process favors tenants. In other markets, low vacancy customers to determine their preferences,Business Needs ranges from three to six months at a minimum. gives landlords the upper hand in negotia- distance from your store and demographics.If your current space is too small, too large, Depending on the size of your business, the tions. Contact your Colliers Internationalor presents challenges to your customers requirements of your store, and the current Professional real estate advice is a critical Estate Advisors professional to learn moreand clients, a new retail space can energize market conditions, you should prepare to part of the project. This will arm you with about market trends in your location.your organization and act as a springboard begin this process 18 to 24 months prior to insight into the marketplace, alternative your lease expiration. It may take two years options, and the financial requirements for or more to complete the lease and relocation each option.Colliers International Retail Leasing Guide P. 5
  • 6. Great Signage FOLLOW THESE EIGHT RULES 1. SPEND THE MONEY 4. TYPEFACE IS KEY sure yours has enough impact to A good quality sign signifies a good Choose a typeface that reflects the broadcast your brand. Be sensitive quality business. character of your company. The more to the environment: take cues from complex the font, the simpler your mes- the architecture and neighborhood sage should be. For script and detailed character in your sign’s design. 2. ANGLE IT RIGHT fonts, use only one or two words. If you Ensure that signs are angled to face must use more words, combine a simple the flow of traffic, between 45 and 90 7. A PICTURE IS WORTH… type with your fancy-font main word. degrees. Signs placed parallel to the Just as a good sign can send a crystal- Also, limit your sign to one or two type- flow of traffic won’t be seen, especially clear message with a few words, a faces. Multiple fonts are difficult to read. by fast-moving cars and pedestrians. picture or object can enhance meaning. We’ve seen a cast-brass top hat on 5. THINK DAY AND NIGHT a tuxedo store sign, a ceramic teapot 3. HIGH CONTRAST Ensure your sign will stand out in on a tea shop’s sign, vines embel- Good, high-contrast sign color options all conditions. Take into account the lishing a garden store and a concrete include black on white or white on dark lighting required (backlit? boxlit? “column” of books outside a bookstore. blue. However, medium-tone colors spotlit? neon?) to keep your sign such as orange and green or pink and visible at night—not just during busi- light blue won’t provide enough contrast 8. MOVE IT ness hours. Another tip: avoid blue for a quick read. When in doubt, print Some of the most eye-catching ele- neon. It is difficult to read at night. the sign mock-up in black and white. ments of signage include motion. This If you see shades of gray rather than can be a mirror reflecting passersby, a a graphic that “pops” with contrast, 6. PUT IT IN CONTEXT portion of the sign swaying in the wind, rethink the colors. A billboard printed Look around the neighborhood where or complex video animation. Keep these with white words on a lemon yellow the sign will be placed. What do the effects consistent with your image. background is almost impossible to read. other signs look like? What colors and typefaces are they using? BeP. 6 Retail Leasing Guide Colliers International
  • 7. The Retail Leasing Process TAKING YOUR REQUIREMENT FROM NOTION TO MOTION STEP TWO: Relocate Confirm real estate requirement evaluation Brief preferred lessors Confirm development sites/existing building options and assess via inspections Begin offer/counter-offer process Short-list options, work with design consultant to evaluate space plan STEP ONE Choose Understand your business needs STEP THREE Fact Determine your property needsFinding Commit to new (or existing) premises Identify decision makers and confirm critical time path STEP TWO: Renew Complete new (or variation of) lease documentation Conduct store requirement evaluation Confirm existing premises as most desirable opportunity Complete tenant improvement design and project management Produce real estate brief Brief existing lessor Evaluate market alternatives: Relocate or renew Confirm real estate requirement evaluation Work with design consultant to evaluate space plan, TI potential Begin offer/counter-offer process Colliers International Retail Leasing Guide P. 7
  • 8. Retail Leasing TrendsWHAT INFLUENCES THE MARKET TODAYSENSUOUS MERCHANDISING CO-TENANCY AND COMPETITION SUSTAINABILITYToday’s merchandising displays are making better use When was the last time you drove down the street and In retail, there are two kinds of green—profit is one ofof the environmental factors that influence sales. Store saw a drugstore…only to see a competing drugstore them. The other green is found in sustainable buildings.fixtures entice and guide customers as they enter. just one block away? Retailers increasingly dare to Although green building is now a major factor influenc-Displays are typically clean-looking, with wider aisles locate near their greatest competition. ing the office market, it is also an emerging concern forand better access to product. retailers who want to elevate their brand image with In lease negotiations, retailers are also adamant about sustainable practices. Additionally, studies indicateIt’s not enough to create an attractive display window— locating next to perceived complementary businesses. that natural light and air have a positive influence ontoday’s retailers are appealing to all of the senses. While co-tenancy clauses once specified anchor shoppers’ spending habits.Stores infuse the shopping experience with music tenants, co-tenancy clauses might now specify a smalltailored to their key demographic, smells and tactile store in another category.delights. A trip into Abercrombie & Fitch with itsshuttered storefront, dark lighting, cologne scents andpumping music makes it clear that this store is not forthe old-at-heart.P. 8 Retail Leasing Guide Colliers International
  • 9. Cut The Queue TIPS TO MAKE LINES SHORTER AND MORE PROFITABLE PLAY IT FAIR other trinkets. Only 15 percent of people in line just wait. People are willing to wait longer if they perceive that they will be helped in the order they got into line. Constant jockeying for GIVE GOOD INFORMATION position frustrates customers. An accurate estimate of the wait time makes shoppers more comfortable, and KEEP IT MOVING more willing to wait. This is also a good opportunity to educate customers about If one register backs up due to a difficult how to make the line move faster. In transaction, reroute the line. Waiting is airports, the TSA places signs to tell easier if people perceive they are closer travelers to take off their shoes, empty to their goal. Despite long lines for rides, their pockets, take out their computers, Disney builds excitement in line by allowing and have their boarding passes ready. Ikea people to see a slice of the action. Signage suggests customers place their scanning tells those in line how far they’ve come and labels face forward on the belt to help the how far they have to go. clerk scan merchandise more quickly. OFFER SOMETHING TO DO FOCUS ON THE TRANSACTION Shoppers will perceive a shorter wait and At a busy cash wrap station, all other a more enjoyable experience if they have activities should be redirected to other the opportunity to do any of the following locations, such as a separate area for returns activities: browse additional merchandise, and for applying for a store credit card. look at a video screen presentation (even if it is entirely promotional), peruse printed One of the worst-case scenarios was materials, fill out a survey, enter a sweep- an apparel store that informed shoppers stakes or sample new products. at the cash wrap that if they purchased three items, they would receive a free belt.Wait times at the “express” lanes Approximately 49 percent of people buy Shoppers would then interrupt their transac-are roughly the same as other something while in the supermarket line. tion, go to the belt fixture and choose theirlanes. While the transactions Typically, shoppers are drawn more to free belt. Imagine the frustration of the nextare faster, the lines are longer. magazine tabloids than to gum, candy and customer in line.Colliers International Retail Leasing Guide P. 9
  • 10. Word on the StreetGLOSSARY OF TERMSABATEMENT COMMON AREA and how far people are willing to travel to FAIR MARKET RENTOften and commonly referred to as free rent The retail common area is the area of a obtain retail goods as defined by drive time The rent which would be normally agreedor early occupancy and may occur outside or shopping center shared by all of the tenants, or mileage. upon by a willing landlord and tenant in anin addition to the primary term of the lease. such as sidewalks, parking lots, service “arm’s length transaction” for a specific corridors, etc. property at a given time, even though the EFFECTIVE RENT actual rent may be different. In a lease,ABSOLUTE NET The average per square foot rent paid by the the term “fair market rent” is defined in aLease requiring tenant to pay in addition COMMON AREA MAINTENANCE (CAM) tenant over the term of a lease. Takes into number of different ways and is subject toto base rent all costs associated with the Charges paid by the tenant for the upkeep account only free rent and stepped rents. extensive negotiation and interpretation.operation, repair and maintenance of the of areas designated for use and benefit of Does not include allowances, space pockets,building, all real estate taxes, and utilities all tenants. CAM charges are common in free parking and other similar landlordincluding repair and maintenance of the shopping centers. Tenants are charged for concessions. FIRST GENERATION SPACEbuilding’s structure and roof. Often the parking lot maintenance, snow removal, Generally refers to new space that is currentlytenant is directly responsible both for all and utilities. available for lease and has never before been EXPANSION OPTIONsuch costs and for the active handling of the occupied by a tenant. A right granted by the landlord to the tenantitems themselves. CONCESSIONS whereby the tenant has the option(s) to add Cash or cash equivalents expended by the more space to its premises pursuant to the FIXED LEASE“AS-IS” CONDITION landlord in the form of rental abatement, terms of the option(s). A lease in which the lessee pays a fixedThe acceptance of the premises in its existing additional tenant finish allowance, moving rental amount for the duration of the lease.condition by the tenant at the time the lease expenses, cabling expenses or other monies EXTENSION OPTIONcommences. This would include any physical expended to influence or persuade the tenant An agreed continuation of occupancy under FREE RENT/RENT CONCESSIONSdefects. to sign a lease. the same conditions, as opposed to a renewal, A concession granted by a landlord to a which implies new terms or conditions. In a tenant whereby the tenant is excused fromBASE RENT DRIVE-TIME APPROACH lease, it is a right granted by the landlord to paying rent for a stated period during theThe minimum rent due to the landlord. An approach to estimating the trade area the tenant whereby the tenant has the option lease term.Typically, it is a fixed amount. This is a face, (and sales/revenue potential) for a given to extend the lease for an ad.quoted, contract amount of periodic rent. retail establishment or center based onThe annual base rate is the amount upon the central place theory concept of rangewhich escalations are calculated.P. 10 Retail Leasing Guide Colliers International
  • 11. FULL SERVICE LEASE executed by both parties. Alternatively such There is usually a base rent amount to which TENANT IMPROVEMENT (“TI”)A lease in which the stated rent includes a document may be signed only by one party “percentage” rent is then added. This type of ALLOWANCE OR WORK LETTERthe operating expenses and taxes for the and is then an indication of a willingness to clause is most often found in retail leases. Defines the fixed amount of money contributedbuilding. Same as Gross Lease. Opposite enter into agreement on the stated terms by the landlord toward tenant improvements.of Net Lease. and conditions. To avoid legal issues regard- The tenant pays any of the costs that exceed RENEWAL OPTION ing offer and acceptance and thus formation this amount. Also commonly referred to as The right of a tenant to renew (extend the of a binding contract, care should be taken “Tenant Finish Allowance.”GROUND LEASE term of) a lease for a stated period of time to include a clause stating that there is notA lease of land only, (either vacant or at a rent to be determined (i.e. 9.5% of “fair a specific offer and no intent to be a legallyexclusive of any buildings on it). Usually a market rent”). TRADE FIXTURES binding obligation. However, an obligation tonet lease on a long term basis (30 years+). Personal property that is attached to a struc- continue to negotiate in good faith to conclu-Ground rent should not be charged back to ture (i.e. the walls of the leased premises) sion can be created. RENT CONCESSION (FREE RENT)the tenant as an operating expense. that are used in the business. Since this A period of free rent given to the tenant by property is part of the business and not the lessor. OCCUPANCY COST deemed to be part of the real estate, it isHVAC The actual dollars paid out by the tenant to typically removable upon lease termination.(Heating, Ventilation, Air Conditioning) occupy the space. It can be expressed in SECOND GENERATIONA general term encompassing any system either pre-tax or after-tax dollars. OR SECONDARY SPACEdesigned to heat and cool a building in its TRIPLE NET (NNN) LEASE Refers to previously occupied space thatentirety, as opposed to a space heater. A lease in which the tenant pays, in addition becomes available for lease, either directly PASS THROUGHS to rent, certain costs associated with a from the landlord or as sublease space. Refers to the tenant’s pro rata share of oper- leased property, which may include prop-LETTER OF INTENT (LOI) ating expenses (i.e. taxes, utilities, repairs) erty taxes, insurance premiums, repairs,There are potentially multiple uses of this paid in addition to the base rent. TENANT IMPROVEMENTS (TI’S) utilities, and maintenances. There are alsoterm. Generally a written statement that two Improvements to land or buildings to meet “Net Leases” and “NN” (double net) leases,parties to a prospective transaction (buyer/ the needs of tenants. May be new improve- depending upon the degree to which theseller or lessor/lessee) intend to proceed PERCENTAGE LEASE ments or remodeling, and be paid for by the tenant is responsible for operating a final agreement in good faith on stated Refers to a provision of the lease calling for landlord, tenant or part by each.principal business terms of the deal to be the landlord to be paid a percentage of theentered into. This meaning applies when tenant’s gross sales as a component of rent.Colliers International Retail Leasing Guide P. 11
  • 12. Shopping Center MORE THAN: > 50,000 shopping centers > 500 shopping centersDefinitions in the U.S. and Canada > 6 billion sf of total leasable retail area larger than 1 million sf > $2.2 trillion in annual sales > 200 million adults visit shopping centers monthlyMALL in all configurations, and are sometimes may be unconnected to other buildings, and HYBRID CENTER connected by open canopies. there are usually only a minimal amount ofA mall is typically an enclosed, climate- A hybrid center combines elements from small specialty tenants.controlled walkway flanked by storefronts. Neighborhood Center two or more of the main shopping centerOn-site parking is usually structured or Designed to provide convenience shopping Theme/Festival Center types. Examples include value-orientedlocated around the perimeter. for the day-to-day needs of consumers in These typically have a unifying theme in mega-malls, power-lifestyle centers, and the immediate area. Roughly half of these architectural design and merchandise. entertainment-retail centers.Regional Center centers are anchored by a supermarket; Entertainment is a common element in suchProvides general merchandise, including a about a third by drugstores. centers, and they are usually anchored bylarge percentage of apparel, and a variety MIXED-USE DEVELOPMENT restaurants and entertainment facilities.of services with several significant anchors. Community Center These centers often target tourists. Retail comprises one of at least three This typically offers a wider range of apparelSuper-regional Center revenue-producing uses, such as entertain- and other soft goods than a neighborhood Outlet CenterIncludes more anchors, a deeper selection of ment, office, hotel, residential, recreation, center. Common anchors include supermar- This center includes manufacturers’ andmerchandise, and draws from a larger popu- sports and cultural venues. A mixed-use kets, super drugstores and discount depart- retailers’ outlet stores selling brand-namelation base than the regional mall. Parking development is not exclusively a shopping ment stores. Tenants sometimes include goods at a discount. These are typically notmay often be structured to accommodate the center, but it often includes a strong retail value-oriented big-box category-dominant anchored, but certain brand-name storessheer size of the center. component. retailers who sell apparel, home improve- may serve as “magnet” tenants. ment and furnishings, toys, electronics and Lifestyle CenterOPEN-AIR CENTER sporting goods. SHOPPING CENTER Most often located in affluent neighbor-An attached row of stores or service outlets Power Center hoods, this caters to the “lifestyle” needs A group of retail and other commercialmanaged as a unit, with on-site parking usu- This is dominated by several large anchors, of consumers in its trading area. It includes establishments that is planned, developed,ally located in front of the stores. Common including discount department stores, off- upscale national chain specialty stores, and owned and managed as a single property.areas are not enclosed. These had tradition- price stores, warehouse clubs or “category serves a role as a multi-purpose leisure-timeally been called “strip centers” due to their killers”—stores that offer a vast selection of destination. Designs include amenities suchlinear layout, but now open-air centers come related merchandise categories at competi- as fountains and street furniture. tive prices. Some of this center’s anchorsP. 12 Retail Leasing Guide Colliers International
  • 13. Colliers International Retail Leasing Guide P. 13
  • 14. Relocation ChecklistA STEP-BY-STEP GUIDEPRELIMINARY r moving notices Mail Finalize new merchandise display plan r r an emergency contact list for vendors Draft and identify each location such as elevator maintenance, buildingr Finalize lease for new location r Banks and financial institutions management, utilities, telecommunications Prepare labels for moving furniture r Notify present landlord of termination dater r Clients and customers—specify old and moving company and boxes of stock to new locations and new location hours and opening/ Advise staff of date and location of mover closing dates Assign move supervisors in each r POST-MOVEr Engage designer for new location department r Professional organizations and Install and test telephone system r r Create a master change-of-address list business vendors Develop a master relocation project schedule r Distribute new phone list and map showing r r Credit accounts and credit cards; Schedule and implement a clean-up program r PRE-MOVE—GENERAL the locations of departments sales representatives (purge files, hold clearance sale, dispose of trash) Install and test all computers and point of r Reserve elevators and loading docksr r Insurance companies sale machines for moving day Schedule staff for unpacking, including new r r Accounts receivable and payable stock displays, stocking supply cabinets, r a detailed walk-through of the premises Dor Bid and award moving contract r Newspaper and magazine subscriptions storerooms, file rooms, and removing tags and report any damage to moving companyr and award telephone and Bid from all furniture and equipment to ensure r Telephone company and internet Transfer your insurance to the new location r computer cabling your company looks fresh and settled for the service provider grand opening Obtain Certificates of Insurance from your r Inventory existing furniture, fixturesr r Prospects and special services insurance company and retail stock Arrange for disposition of any unsold r r a meeting at new location three Hold clearance merchandise if it is not moved r Confirm termination of old leasesr furniture and equipment on a color- Code weeks prior to move. Bring in all parties with the store coded floor plan; create new retail display Collect parking passes, security cards and r involved (design/construction/mover/cabling floor plan r contents of all filing cabinets and desks, Pack keys for the old facility. Confirm the return company/information technology specialist) ensuring everything is properly labeled of any deposits held by the landlord forr Audit keys to ensure all details are covered and all these items Order any new fixtures, furniturer responsibilities clear Arrange for staff to tour new premises a few r weeks prior to move r final invoices against contracts Audit and equipment Schedule public relations effort, including r plans for news releases and a grand opening Schedule post-move training for security, r Complete and file all warranty information r Order new stationery, bags, and collateralr party or sale fire, and life safety procedures at the new for all new furniture, fixtures and equipmentr change-of-address forms with post File facility Decide on security procedures for the move r Update fixed asset accounting system for r office and forward mail Distribute access cards and keys r any new equipment purchased Check your insurance coverage for the mover Arrange for listing on directory of new r for new premises Confirm the change-of-address r building Obtain the Certificate of Occupancyr corrections made and any other required permits or licenses r Arrange for post-move cleaning MOVING DAY Advise suppliers (telephone, beverager Arrange with the building manager to have r PRE-MOVE—INTERNAL service, various merchandise distributors) the air conditioning on during the move of new address Organize a “staff moving committee” if r Remove computer equipment, point of sale r appropriate and delegate responsibilities Change locks/access codes on new locationr equipment and phone system prior to arrival as close to moving day as possible to secure Schedule and prepare agenda for your r of movers and commence reinstallation at access employee move orientation meeting new siteP. 14 Retail Leasing Guide Colliers International
  • 15. This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content,accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss andColliers arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s). ©2010. All rights reserved.damages International Retail Leasing Guide P. 15
  • 16. www.colliers.comAccelerating success.P. 16 Retail Leasing Guide Colliers International