Tenant's time has come
27.04.2016 6401

Tenant's time has come

Economic stagnation has opened up new opportunities for tenants of retail space: developers are ready to concede and offer flexible rental conditions.

High-quality retail space is empty. Some international operators have stopped working in Russia, other players have optimized their business and carefully choose the location of the store. But new retail facilities continue to be commissioned. To leave an object unfinished for a developer means maintenance at a loss, not to mention the accrued interest on borrowed money. As a result, shopping centers open half full.

Today, the total supply of space in retail facilities in the country is 23,93 million square meters. CBRE predicts an increase in vacant space from 9,5% at the beginning of the year to 11% by the end of the year. So the volume of empty space by the end of 2016 will be 17%. In such a situation, developers go to almost everything just to fill the retail facility without prejudice to its conceptual component.

“Now, of course, is the tenant's time. In practice, we see the flexibility of the owners of retail properties, who offer tenants more than just loyal conditions. But the tenants, of course, understand the profitability of the situation and strive to bargain for the best conditions for themselves, - said Anastasia Kirpichenkova, head of the rental department of the MALL. Expertise & Consulting ".

What conditions are developers ready to accept now? According to the experts of MALL. Expertise & Consulting ”, the following agreements may become a compromise regarding the lease of space in a shopping center that is still under construction or is being prepared for opening.

Firstly, the escalation of the rental rate is a gradual increase in the rental rate: for example, a reduced rate in the period 1-6 months; partial increase in the period of 7-12 months; increase to a constant rental rate starting from 13 months. This approach will allow the lessee with the least losses to get used to the area and generate constant customer traffic.

Secondly, a percentage of the turnover and the minimum fixed rate. It provides a guarantee to the lessor in obtaining a monthly rent and allows the tenant to save during the "promotion" of the store.

Thirdly, reducing the size of the deposit to the amount of a monthly rent or applying a bank guarantee. Until recently, the size of the security payment was arbitrarily set by the lessor. Now tenants are invited to make a security payment in the amount of not more than a monthly rent.

Also, instead of a security payment, a bank guarantee may appear - this is a bank guarantee for a certain amount, which the lessor will be able to use only after the occurrence of a guarantee case.

Fourth, a decrease in the size of annual indexation. At the moment, the size of the annual indexation is on average 3-7% compared to 10% earlier.

If negotiations are ongoing regarding the retail space in the existing shopping center, it will be useful for the lessee to find out that the developers are ready to lower the rental rate for a certain period. But in most cases, only those tenants who are significant for the retail facility but who experience temporary difficulties can count on this opportunity.

The developer can transfer the tenant to pay the rent in the form of a percentage of the turnover with maintaining the minimum fixed rate in case the tenant's profitability has decreased and expenses have begun to exceed revenues. In this case, a lower than previously fixed rate is assigned plus interest from the turnover.

Moving a tenant to a smaller area is a frequently used tool for retaining a tenant in the event that a retailer loses profitability. Since the tenant has already accumulated its traffic, a change in location within the shopping center will not greatly affect store traffic. A smaller rental area will optimize the cost part, which will increase the profitability of the trading company.

And finally, almost all landlords have already translated the agreements into rubles or fixed the exchange rate on average remains at the level of 40-50 rubles / $.

Economic stagnation has opened up new opportunities for tenants of retail space: developers are ready to give in and offer flexible terms ...
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