In the give-and-take of retail space leasing in metro Jackson, today’s tenant takes and the landlord gives.
With too many buildings either entirely empty or half empty, landlords are making deals they hope they don’t live to regret. And they are happy to take from their neighbors, knowing their neighbors won’t hesitate to take from them, said commercial broker Brian Estes of The Estes Group. “A lot of cannibalism is going on.”
Move them or lose them is how Bob Ridgway of Ridgway Realty sees it. “We’ve probably moved 40,000 square feet of folks in the last 12 to 18 months,” the commercial broker said. “We’re having to be aggressive. They were going to move. It was just whether it was going to be me or not.”
You can avoid getting your business consumed by the competition, but you must get flexible on rates and other lease terms, commercial real estate professionals say.
Tenants are ready to listen, especially when the talk involves below-market rates and a lengthy lease, Estes said.
“I think some people are getting tired of sitting on the fence,” he said. “Especially in the last 24 months people have been on hold, sitting still making sure their own businesses are going to survive. “
Today, he added, “They have a better feel for where their businesses are.”
And they aren’t bashful about asking for concessions, said Ridgway. He wouldn’t be bashful if the trend were reversed, he said. “We’re both in the same boat and we’ve got o work together.”
If a tenant today wants an attractive rate and a long lease, “I’m telling him that’s wonderful — if he’ll stay,” Ridgway said.
Gary Cress says his Commercial Property One’s properties are “doing just fine,” but the downturn has forced the manager of primarily grocery-anchored retail properties to reduce rents “in some situations.”
Added Cress: “There’s pressure… The tenants are negotiating harder.
“There’s a lot of vacant space. Rates have declined. There are fewer tenants out there. So there’s a tenants’ market.”
Cress attributes some of the over-supply of retail space to buildings that went up in the Mississippi Gulf Opportunity Zone, or GO Zone, established after Hurricane Katrina to spur rebuilding and new development through tax incentives and low-cost bonds. “Some went up strictly for the depreciation,” Cress said. “That generated a lot of extra space in Jackson that normally would not have been built.”
Tax credits and other incentives led some tenants several years back to build their own buildings, Ridgway said. They found they couldn’t rent the portions of the buildings they had planned to lease out, he added.
The result “is a whole lot of buildings that are half empty.”
Now, the tenants-turned-landlords are bearing high costs and having to compete against properties that have become “real competitive” on rates, Ridgway said.
The successful building owners and operators, Cress noted, will be the ones able to adapt and bring value to the tenant. “Watch expenses,” he said. “Be more aggressive in your marketing. Be more proactive in keeping your tenants by working with them in any way you can to help make them successful.”