Temporary leases to retailers sell well during the holidays

Real Estate Weekly, May 31, 2000

Temporary retail space leasing during the holiday (or any) season is a win-win situation, according to Farron Roboff, senior vice president/Northeast Region at Katz & Associates. Opportunistic leasing offers maximum return for a limited investment.

According to Roboff, there are two types of temporary lease arrangements - utilizing existing vacant retail space and kiosk programs. In the first, vacant space (or in-line space) is retrofitted to meet the needs of the temporary tenant. This opportunity provides the leasing establishment a way to fill the space at a highly trafficked time of year, and offers the tenant a chance to operate for a few months during the height of its selling season without making a traditional long-term commitment.

Kiosks or carts offer space in mall common areas to attract high traffic to retail locations. Each kiosk houses an individual business wishing to operate in the hallway areas. Temporary kiosk leasing provides the opportunity to offer "hot" trend items, seasonal products or to test new products in the marketplace.

Businesses benefit from temporary leasing, especially surrounding holidays such as Christmas/Hanukah, Valentine's Day, and Mother's Day/Father's Day. For example, during the past five years, Katz handled in excess of 110 temporary in-line leases annually for Kay Bee Toys during year's end, when the retailer's permanent space does not meet the high demands of holiday shoppers. Therefore, Kay Bee Express was set up to offer more promotional merchandise during a temporary spree. Toys are the season's hot commodities and by stepping up their presence in malls in November and December, Kay Bee understands that they can reach a larger audience with more products.

Today, e-commerce companies are setting the trend for year 200 temporary lease. These businesses set tip live terminals in kiosks in regional malls. Whether alone or tied-in with other retailers, they can sublease temporary space from the official temporary tenant or lease space on their own. ClubMom.com. for example, allows mall visitors the opportunity to sign-up for their free online service via live terminals set up in kiosks. Funded by major consumer product manufacturers, those signing up receive promotions and discounts. By setting up shop in high-traffic areas, these temporary leases provide high-traffic visibility.

Often temporary store and kiosk leasing for the holidays are not guaranteed until landlords know where they stand regarding permanent leases. If another retailer is interested in a permanent lease, that space will then be committed to the year-round leaser as opposed to the temporary site retailer.

In-line space is less available if the economy is good, notes Roboff. In order to secure this space, retailers must compete with other retailers. The landlord ultimately determines the best tenants for the space. Since there is increased competition for the limited space, it is important for a retailer to work with a leasing agent that has a relationship with the landlord, especially when space is at a premium.

In addition to giving merchants the opportunity to sell seasonal merchandise, temporary leases also allow retailers an opportunity to test the environment and product before making that long-term commitment.