Every day, chain stores are closing their doors around the country. This unprecedented wave of mall closures and vacancies is presenting an exceptional opportunity for enterprising local business owners to leverage the real estate boon. The retail landscape is shifting and accelerating. From Mom & Pop to Big Box, small businesses are getting in on the action, taking advantage of the opportunity to move into otherwise unaffordable spaces that are now empty.
Industry experts all agree that a few key things impact small business success. These factors are driven by the nature of lease agreements and the willingness of landlords to adjust to a changing economic landscape. Andrew Spatz, a local business advocate, talked about the impact such leases would have on small businesses. He contended that once landlords get off of the “triple net” arrangement further tenant burdens such as payment of property taxes and upkeep are removed.
Marc Norman, a commercial real estate broker, illustrates the shifting determinants of a non-traditional business’ capacity to win locations. These places might have previously been home to luxury brands. He emphasized the need for pedestrian connectivity and just the general vibe of the space.
“Empty space sends a message that a place is struggling,” Norman stated. As for consumers, he added, they want to go to places where they can experience walkable corridors and populated store fronts. “We don’t want to walk by 15 empty spaces and see one or two occupied spaces.”
In northern Michigan, Andy LaPointe operates two retail outlets in strip malls and has observed firsthand the impact of changing dynamics in the retail sector.
“What we’ve found is when national brands pull out of prime spots, it’s less about simply filling those spaces. It’s really about rethinking it as an experience and a place that really reflects that local community,” LaPointe said. He has seen first hand how special small businesses can instill a sense of belonging in communities that have lost a lot.
Elizabeth Lafontaine, who monitors foot traffic in retail corridors, reported a noticeable uptick in small businesses taking advantage of vacancies. “Main Street opportunities are definitely on the rise for tenants beyond the traditional retail model,” she noted.
Rooted co-founder Teresha Aird emphatically agrees with this sentiment. Now, she explains, areas once considered too high cost are now welcoming to the independent retailer and service-oriented businesses. “That’s opened the door for independent retailers, fitness operators, and – in particular – service-based businesses, who were previously priced out,” Aird remarked.
Small businesses have been hit hard by the challenging economic environment. Possibilities are to be found for anyone willing to engage in smart negotiations over lease conditions. Local entrepreneur, Jacob Naig, ended up winning a surprisingly flexible lease agreement with rent at a rate that made it feasible for him to create his business there. “Landlords in my area generally don’t want space to sit empty, which opens up opportunities for smaller businesses,” Naig explained.
The road to success has not been easy. Perhaps local business owner Glenn Brill imparted the most important takeaway. He cautioned that many landlords remain skittish as small businesses have a high failure rate. “For most small businesses, the best opportunities aren’t in empty big boxes, but in smaller strip centers,” Brill said.
James Bohnaker, a market analyst, provided insights into rental trends, stating, “The rental rates are going up, but not at the same rate of increase.” This suggests that even if a vacancy presents an opportunity for creative negotiation, landlords are often motivated to ensure profitability.
As the retail landscape undergoes permanent and irrevocable change, landlords and potential tenants will need to tread more carefully than before in this post-pandemic world. Marc Norman underscored the need to know your market, and how the market is shifting. “The decision might be that you want to empty the retail space to sell,” he noted.
Andrew Spatz, on reengagement panel, noted that geography is very important when it comes to small business opportunities. Each region has their own particular challenges and opportunities that need to be addressed through improving the climate for local business.