NNN Lease Market News
Goodbye to Circuit Citys and Old Navys; Hello, Gun Ranges, Aquariums, Go-Carts
Mall giant Simon Property Group Inc. opened an aquarium in July at its Grapevine Mills mall near Dallas. Real-estate brokerage Jones Lang LaSalle Inc. put a fencing academy in a former Old Navy store in Florida's Tallahassee Mall, and a community theater on the lower level of a former Boscov's store in Harrisburg,Pa.
Nontraditional tenants, in many cases, though, don't pay as high a rent as major chains would pay. What's more, nonretail tenants often don't pay percentage rents, a form of bonus rent that retailers pay from a small percentage of their sales when they exceed a certain threshold.
Even top performing mall companies—like Simon, which reported a 19% rise in earnings Tuesday—are looking at restaurants, entertainment and other nonretail uses as a hedge against the drain from online shopping. Glimcher Realty Trust purposefully filled 25% of its upscale Scottsdale Quarter mall near Phoenix with restaurants such as Stingray Sushi and services like Drybar, a salon that specializes in blow drying women's hair. "She can't go out to lunch and have a salad and a glass of wine with her girlfriends online," Glimcher Chairman and CEO Michael Glimcher said, referring to the mall industry's coveted female shoppers.
Struggling shopping centers, like the Tallahassee and Harrisburg malls, meanwhile, are signing nonretail tenants because no one else is lining up for the space. But adding a tenant with limited potential to bring shoppers to the rest of the center—like classrooms or a church—often isn't popular with existing tenants. The move can be seen as giving up on the center as a retail venue.
