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HomeNewsletterRetailers gain opportunity to become CRE owners amid pandemic

Retailers gain opportunity to become CRE owners amid pandemic

One retailer’s loss appears to be another one’s gain during the COVID-19 pandemic. The Wall Street Journal reports that different companies are purchasing struggling malls at a discount. For example, home furnishing company Safavieh acquired the Stamford Town Center mall in October after its lost key tenants like Apple, Talbots and H&M to a nearby competing shopping center. Safavieh looks to open a home-design center and relocate its home furnishings store to Town Center Mall. Safavieh paid $20 million for the mall property, which was appraised at $64 million in 2019, according to a Stamford government website.

The Safavieh-Stamford Town Center mall situation isn’t unique during the COVID-19 pandemic. Mall owners have had difficulty maintaining tenants and collecting rent, putting them in a situation to find replacements or sell the property. Retail operators are leveraging the situation to finally become commercial real estate owners.

“We have seen retailers zeroing in on buying opportunities,” Ariel Schuster, vice chairman at real estate firm Newmark said recently. “Historically, the most active buyers have been in the luxury sector.”

Other examples of retailers becoming CRE owners amid the COVID-19 pandemic include Swiss clothing retailer Akris, who bought three buildings on Madison Avenue in New York for $45 million. That purchase price was lowest paid on a per square foot basis in that area in a decade. Meanwhile, Home Depot plans to move its basement store to four-story building in Manhattan that Bed Bath & Beyond currently occupies. The home furnishings retailer has experienced declining sales for yeas and doesn’t plan to renew its lease.

“We chose this location because it’ll be convenient for residents on the Upper East Side and offered the space we need just as our existing lease expired,” Home Depot spokeswoman Margaret Smith said.

Repurposing properties could be part of CRE’s future

During the recent Connected Virtual Tech Event, Connected Real Estate Magazine CEO and Publisher Rich Berliner, CannaMLS CEO Jade Green, Northwestern adjunct professor Eric Abbott and JLL Executive Vice President Geno Coradini took part in a panel discussion about creative ideas and alternatives to help landlords replace lost retail tenants and revenues amid the COVID-19 pandemic. As flexibility increasingly becomes the key word for a lot of CRE owners during this time, some alternate uses for properties discussed during the panel included medical clinics, childcare centers, entertainment venues and cannabis dispensaries.

The panel discussion fell in line with the type of tenants that are currently looking for new real estate opportunities—they typically have benefitted from people staying at home. This would include big grocery retailers, furniture stores, discount good shops and pet supply stores, according to brokers.

Some specialty retailers have also leveraged the situation. Sever Garcia, a New York accessories and travel items store owner told The Wall Street Journal that his new landlord offered three months free rent and other incentives when he moved from downtown Brooklyn to an upscale Tribeca neighborhood. The deal helped keep him in business as foot traffic waned due to office workers and tourists having yet to return to the city. In the meantime, he’s receiving offers from property owners that include terms like six months of rent based on a percentage of sales. Garcia is staying put for now, however.

“It’s not the best time to test new businesses,” he said.

Joe Dyton can be reached at joed@fifthgenmedia.com.

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