Saddled with market-topping lease and rental rates, stressed out US retailers have begun asking building owners for financial relief, claiming their rents are too damn high, sources tell The Post.
Faith Hope Consolo, who chairs Douglas Elliman’s retail division, said the calls started slowly in early September, but she is now getting queries every day.
It’s an “epidemic,” Consolo said, noting that “some tenants aren’t asking for relief but a 50 percent reduction. That’s pretty aggressive.”
The stores involved, she says, “are on every major avenue” and in hot areas like Soho and the Meatpacking District, where rents rose dramatically over the last few years.
Patrick Smith of JLL has had the same experience.
“A lot of tenants are going back to the landlords to try to restructure their rents,” Smith said, adding that many of the calls are from stores in the now-challenged apparel sector.
“It’s widespread today,” Smith said, adding that the stores have problems encompassing their projections, the rents and actual company sales. Some are even trying to renegotiate before the store actually opens.
Neither Consolo nor Smith would say which stores were seeking relief.
The calls are so frequent that JLL has an entire division focused on such workouts — thus taking the brokers who worked on the deals out of the renegotiating loop.
“Generally, landlords will try to play ball with them,” Smith added.
Tom Mullaney, co-chair of JLL’s restructuring division, said it was not just New York City stores that are trying to win lower rents.
“We are seeing it on Market Street in San Francisco and on Michigan Ave. in Chicago,” Mullaney said.
In New York, Mullaney also says that the most problems are in Soho and along Fifth and Madison avenues, where asking rents are down from 25 to 50 percent from their peaks two to three years ago.
“The storm is getting worse,” he added. “The only part of the retail landscape getting through this unscathed is the sharp-priced retailer like Family Dollar, T.J. Maxx and Costco.”
“The smart [landlords] work constructively and make lemonade out of lemons,” Mullaney said. But others feel they needn’t budge. Still, at some point, Mullaney warned, the tenant may simply hand back the keys and say, “See you in court.”
A Manhattan owner of retail rental space who asked to remain anonymous was blunt: “Landlords do not give reductions to strong tenants — unless they get something out of it such as the right to cancel their lease or get an extension of the lease.”
As the owner explained, “None of those tenants would agree to pay more rent to me if I asked them to because the market had gone up.”