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Shopping Centers Today -> May 2004
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AS SPECIALTY LEASING GROWS, SO DO TEMPS RENTS
BY DEBRA HAZEL
DALLAS — The specialty leasing business is healthy and growing, but so are the rents, speakers complained at ICSC’s 17th annual Specialty Retailing Conference & Trade Exposition, which was held here this spring.
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“Perhaps some mall management companies have some unrealistic ideas about what we can pay,” agreed Mark J. Eberhardt, president of First Class Seats, a Racine, Wis.-based manufacturer of massage chairs.
But rising rents are inevitable, developers countered, given the growing number of temporary tenants competing for a finite amount of space.
“For the past 20 years now … every year we think we’re not going to grow, and every year we do,” said James H. Allen, senior vice president of Simon Property Group’s retail development group.
“Supply and demand will dictate what the rent will be,” said Melinda M. Holland, senior vice president of business development at General Growth Properties.
Several factors are contributing to the growth in temporary tenant business. Global trade is increasing the variety of goods that tenants can sell from their carts, speakers said. The improving U.S. economy is fueling growth too; after a difficult couple of years following the Sept. 11 terrorist attacks, holiday business has come back strongly, said John Flynn, president of Seaford, N.Y.-based specialty retailer Halloween Scene.
As long as business is good, tenants will be able to pay even if rents are escalating, several specialty retail executives said. “[With our products], we’re not concerned with that,” said Jonathan Kadoch, a senior account representative at Richardson, Texas-based Sensation Beauty, which manufactures and distributes skin care products made from minerals from the Dead Sea.
Rent was not the only issue discussed at the meeting. Some merchants are concerned about competition from Wal-Mart, which, mere months after some products are introduced at carts and kiosks, starts carrying those items itself — often for less.
Then there is the question of long-term growth. The traditional breeding ground for temporary tenants has been the enclosed mall, but few of those are being built these days. At open-air malls, meanwhile, temp tenants have not yet become a mainstay. But it’s only a matter of time, said Holland. “I’m convinced that developers will find a way to put carts and kiosks in an open-air center,” he said.
More than 1,000 industry professionals attended the meeting, the most to have come for several years, organizers said.
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