Married to the Mall?
The 10-year retail lease—a shopping center staple for decades—was already on shaky ground pre-pandemic, but Covid-19 disposed of what shreds remained.
“We are noticing a new trend of tenants requesting shorter-term leases for new deals and renewals, typically a three- or five-year term instead of a traditional 10-year term,” says Heather Brechbill Swilley, Mall of America’s senior vice president of leasing. But, she adds, even that’s too much of a commitment for many new retailers, who prefer to test the waters with a temporary pop-up before leasing, such as gunmaker Beretta currently showcasing its apparel line at an MOA temporary store.
That means more work and less stability for shopping centers that long relied on big monthly checks from prominent retailers like Brooks Brothers, Sur La Table, and True Religion—just a few of the bankrupt brands whose doors have closed in the Twin Cities during the pandemic. Burnsville Center went into foreclosure in October.
“There’s a lot of space out there,” says Stefanie Meyer, senior vice president and principal of Mid-America Real Estate-Minnesota. “Activity is down across the board—retailers are concerned about winter and they just want to wait.”
The brands that are out looking for space—mainly local startups or well-funded nationals like Orange Theory and lululemon—want smaller footprints than they did even a year ago, and they expect a break on rent, Meyer says. “But construction is no cheaper. In some cases, it’s more difficult to get supplies now. Landlords can’t get more [flexible] on rent—lenders won’t let them.”
Rosedale Center leads the pack in adaptability. Locally owned, Southern-inspired Adam’s Soul is the latest restaurant arrival. For Halloween, Rosedale turned the old Herberger’s loading dock into a Covid-safe “Deadly Drive-In” and sold more than 1,000 tickets at $75 a pop.
“We threw out the old ways of doing leasing two years ago and came up with non-traditional leasing efforts,” Rosedale senior general manager Lisa Crain says. “We are reaping the rewards now.”
Touting fresh air and temporary leases, lifestyle centers seem to be having some success. The Shoppes at Arbor Lakes in Maple Grove filled the former Pottery Barn Kids store with Fox Run, an occasional shop featuring 25 makers. At 50th & France, the new Nolan Mains mixed-use development lured downtown stalwart Hubert White for a holiday pop-up.
“Attracting the consumer today is predicated on a sense of discovery, experience,” says Peter Deanovic, principal of Buhl Investors, which leases the retail portion of Nolan Mains. “That can’t be achieved with a bunch of 10-year leases and national brands doing five stores in the Twin Cities.”