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Communication: key to temp leasing

By Kevin Kenyon

For years, specialty and permanent leasing staffs have squabbled like siblings, but developers are finally bringing peace to the family.

Initially cast out separately, the permanent and specialty leasing divisions of the shopping center industry have been brought together through economic necessity and the need for more communication between the two groups.

Specialty leasing, once viewed as a pariah, now plays an important role in generating revenue for shopping centers at a time when in-line retailers have been plagued by bankruptcies and store closings.

Specialty leasing professionals, for their part, have been charged with a mission vital to the industry's future -- finding, incubating and developing the next generation of permanent retailers that will fill those vacant spaces.

The growing importance of this role has had a number of effects on specialty leasing, including the need to work more closely with permanent leasing on a day-to-day basis.

Realizing this, some developers have established initiatives to encourage constant communication between the two groups.

Some have done this by shifting specialty leasing from the retail operations department to the leasing division, while others have linked their databases to keep both up-to-date. Others are conducting weekly leasing meetings aimed at keeping everyone on the same page.

While such open communication may seem commonplace today, specialty leasing professionals say it is a marked contrast from the early days, when both groups often operated independently and there was little if any communication going on.

It was not uncommon, for example, for specialty leasing agents to wrap up a deal with a temporary merchant for an in-line space only to find at the last minute that a permanent retailer was ready to start construction.

"It was often upsetting because permanent leasing would say 'kick the tenant out, I've got a tenant coming in, you didn't tell me what was going on,'" said Heidi A. Maybruck, director of specialty leasing for Glimcher Realty Trust, Columbus, Ohio.

To help avoid such situations, Glimcher officials incorporated the specialty leasing database with the permanent leasing database at its corporate office. When a permanent leasing representative goes into the system, and specialty leasing has a tenant in that center, a blip on the screen tells the staff what space is occupied by a particular temporary tenant, and the length of the lease.

"Right there from the beginning of the permanent leasing proposal, they know what's at hand, and that gives both of us a heads-up to know what's happening in the future," Ms. Maybruck explained. "On the other hand, if we have a temporary tenant we're interested in, we can go into the permanent leasing database, pull up a space number, go into permanent leasing's notes and look at their progress."

Glimcher also conducts Monday morning conference calls, in which specialty leasing agents, general managers and permanent leasing agents from around the country hold a leasing meeting.

"It's exciting. Before, everybody was doing their own thing, everybody had their own agenda and nobody talked to each other. Now, within Glimcher, it's really improved," Ms. Maybruck said. "This is what I wanted for many years. Specialty leasing, at least at Glimcher, is always being thought of now."

According to Lisa Lasota-Poole, vice president, director of specialty leasing for Urban Retail Properties Co., Chicago, specialty leasing's progression began when it was switched from the management division to leasing several years ago.

"New management at the time decided that specialty leasing should report to the national director of leasing, From then on, permanent leasing and temporary leasing became one as far as how we think and how we work together," Ms. Lasota-Poole explained.

This was a positive contrast from before, she added, when general managers did a lot of local leasing and conflicts over space were inevitable.

"With this set-up, it's checks and balances, much more than two separate groups working in their own direction. This way we're working together and we can both make a mutual decision instead of someone making a decision in a tunnel."

With initiatives such as these pushed down from the top, management clearly realizes that specialty leasing will continue to play an important role in the industry's future.

"You're seeing the legitimization of the specialty leasing person," said David Contis, COO for The Macerich Co., Santa Monica, Calif. "It is no longer the 'illegitimate stepchild' and is now almost equal in terms of recognition and compensation with permanent leasing."

In fact, Mr. Contis believes ICSC should recognize specialty leasing agents with a designation similar to ones given to marketing directors (CMD) and leasing specialists (CLS). "This is a profession now and it needs to be accredited as such."

But while communication may be improving, a little competition can be a blessing, at least from an owner's perspective.

"A good specialty leasing person pushes the permanent leasing person because if that leasing person isn't leasing that space permanently, the temporary person should be," Mr. Contis explained.

"One thing that hasn't changed, however, is that if you have a good specialty leasing person and a good permanent leasing person, you will always have creative tension, which by the way I feel as an owner is very beneficial to the property."

According to Sharon Polonia, senior vice president of Equity Properties & Development L.P., Chicago, the specialty leasing industry has come a long way since the early '80s, when only a handful of individuals did specialty leasing full-time. Their jobs usually consisted of sitting in a corporate office, overseeing a portfolio of merchants. They were expected to set up rules and regulations, help mom-and-pop merchants and collect rent, which left little time for small talk.

"During this time period, there was always this thing that we should communicate with the permanent leasing reps. But really, it never happened because the program was so small, and just getting started -- there really wasn't a lot of time to communicate."

The next important step in the industry's evolution occurred around 1986, when owners started putting specialty leasing agents on-site, said Ms. Polonia, who is regarded as one of the pioneers of specialty leasing.

With that came added expectations, including more income, enhanced visual merchandise standards, and a higher degree of professionalism. According to Ms. Polonia, it also raised the sophistication of specialty leasing agents as a group.

"They began to understand what the shopping center's needs were, they understood the market, they understood the mall and they understood the needs of the community," she said. "All of a sudden they said 'Why can't we do these permanent deals?' -- and that seemed to happen at the same time the whole industry hit the fritz in the late '80s and early '90s."

With leasing at a premium, many specialty leasing agents were trained through their leasing departments to complete permanent deals. "Bankruptcies drove and created shopping center supply, which put even more pressure on specialty leasing to create permanent deals," Ms. Polonia explained.

Between the late '80s recession and the retail bankruptcies of the early '90s, many permanent leasing agents had been suffering for years. By 1994, according to Ms. Polonia, economic necessity brought the two groups together.

"That kind of forced the communication because they started to believe, 'If these individuals can help me make deals, let's go with it.' They were taught to work as a team. During that time period, specialty leasing was gaining respect within the industry as a credible part of the shopping center business."

Elaine Berger, vice president of specialty leasing for PREIT-Rubin Inc., Philadelphia, concurred that economic factors have brought permanent and specialty leasing together.

"We have always had a close working relationship, but I think the relationship has been strengthened over the past two to three years with the number of bankruptcies among permanent merchants.

"Everybody understood the necessity for all of us to work hand-in-hand in order to make sure that dark stores were filled with short-term merchants until permanent deals were completed," she explained.

To encourage an open dialogue, officials at PREIT-Rubin hold weekly meetings and share information regularly, but the best method is to simply pick up the phone, Ms. Berger said.

In many cases, she added, the two groups have helped each other. "We've done a lot of incubation of short-term merchants which has resulted in permanent deals, while our permanent reps often come to us with a merchant who would like to go into the center, but wants to test the market first."

The bottom line, as far as Ms. Berger is concerned, is that both specialty and permanent leasing agents are looking to accomplish the same thing. "The goal is to have a shopping center which is fully leased, with as many lights on as you can possibly get. You don't want barricades. To that end, we both work toward the same goal."

Specialty and permanent leasing agents definitely work closer today than they did several years ago, said Deborah Georgetti-Piro, director of specialty leasing for Corporate Property Investors, New York.

"In the '80s money was flowing, it was a whole different ballgame, and there wasn't much of a need for communication. But no company wants vacant spaces, so senior management made sure that we worked more as a team."

With rents at an all-time high, especially in so-called "A centers," more is being asked of today's temporary tenants than ever before. Many have responded by offering employee incentives, putting more emphasis on training and generally operating as sophisticated businesses, said Carol Ann Sivek (Cas), vice president of specialty leasing for TrizecHahn Centers, San Diego. In addition, she said, the money generated by specialty programs has helped permanent retailers.

"There's no doubt that it helps everybody, including the tenants in the center because that money goes directly to the bottom line," Ms. Sivek said.