Cultivating independent tenants can be a worthwhile investment, panel says
Publish Date: November 20, 2014
Although smaller, independent tenants can present certain challenges, those shopping centers that make a focused, informed effort to cultivate them often find that the benefits outweigh the initial risks and hassles, said panelists last week at an SCTLive discussion titled “Nurturing Tenants,” in Chicago.
The number of independents among retailers overall has been declining, but panelists said such tenants are worth supporting as an integral part of the shopping center ecosystem because of the local flavor and distinction they can bring to the tenant mix. Independent chains may not be able to match the lower prices a chain can achieve, but they can compete on service, the speakers said. Even given a highly cost-conscious public, a customer who receives excellent service from an independent is often willing to pay a bit more than he might at a chain store, said Dwayne Rancifer, the owner of some two dozen Boost Mobile stores across Illinois, Indiana and Missouri.
“It’s a good thing for the industry, long term, to push independents,” stressed Conor Flynn, president and COO of Kimco Realty.
What is more, unlike three or four years ago, owners now can afford to give up a few dollars per square foot to get the additional “flavor” an independent adds to a center, said Thomas Lithgow, president of Inland American Retail Management.
But there are sometimes issues with financial transparency and accuracy, the panelists agreed. Lithgow, who has substantial experience with due diligence, said that a mom-and-pop store is harder to analyze. Would-be independent tenants sometimes submit inaccurate data, concurred James Matanky, CRX, CLS, CDP, CSM, president of Chicago’s Matanky Realty Group.
Making the reasonable assumption that most independent retailers are honest, though, the panelists described several means of attracting them and helping them succeed. Kimco and Inland American operate programs that offer free rent and other benefits to qualified retail startups. Kimco’s KEYS program has been under way for four years and currently operates in Arizona, California, Colorado and Nevada. Its participants are often transitioning from a home-based or solely online business model.
Inland American’s In Business program is similar to KEYS, said Lithgow, not least in its offers of one year of free rent, with the tenant paying only triple-net-lease expenses. “We don’t want to set them up for failure,” he said. Inland American also uses a short-form lease to make things simpler for tenants.
Matanky Realty maintains a variety of relationships, including with Governors State University (in suburban Chicago), numerous independent grocers and the Chicago Community Loan Fund, said Matanky. “There’s a lot of hand-holding involved” in nurturing new retailers, he said.
More tactically, special events can help independents by bringing customers in contact with stores they do not usually see during routine shopping at a center, Flynn said.
The pool of independent retailer categories has grown more diverse in recent years, panelists said. Lithgow cited yoga studios; a shop that sells dresses for proms, weddings and similar occasions; a vinyl-record store; and a men’s shoe store that’s “all about the customer experience” and has lots of repeat business.
Post offices make great tenants, Matanky said. He also cited a comic-book shop that seems to be doing well and a bakery that was launched in someone’s home and has now been in shopping center space for about 15 years.
In general, said Flynn, good concepts are those that cannot be delivered online, like hair or nail salons, urgent-care centers or a gym that a military veteran opened to offer boot-camp-style training.
If an independent happens to be doing well, Matanky summed up, it is in everyone’s interest to keep it going and growing.