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The Art of Timing

“A shopping center has lost its anchor… its niche, and continues to struggle.” — This describes many shopping centers in the urban setting of the United States today. In fact, according to recent news, mall vacancies have climbed to their highest in the last decade as U.S. store closings persist.

I recently heard of a shopping center that lost its niche, largely due to an untimely action taken by its landlord which resulted in unintended consequences.  We can learn a valuable lesson from their errant timing.

The landlord had a long-term tenant popular with the community and successful at drawing traffic to their center.  This tenant had consistently paid their rent and common area maintenance (CAM) fees on a timely basis and was preparing to renew their lease.  Their business was good, especially considering the economy and the center’s occupancy percentage.  Instead of embracing and trying to retain this stable tenant, the landlord gave them notice of an increase in rent and CAM and was unwilling to negotiate with them to hold the rent at the same level. Perhaps the landlord felt they had to insist on an increase to mitigate the financial impact of the poor overall occupancy rate of the center.  The unfortunate result was another retail spot gone “dark.”

There is an appropriate time to raise your rent or your prices.  You need to use discernment, however, during a cycle such as we are now experiencing.  Fully understanding the market rate for rentals in your area and the incentives other leasers may be offering to fill their spaces will help a landlord to avoid the unintended consequences of poor timing and uninformed actions.  In a market that favors the leasee, appreciating what you have in a stable tenant is paramount.  This landlord would have been better off to hold the rate and renew the tenant.  Business people need to be attuned to the strategic timing of the execution of their plans.