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Staples To Close Many of Their Retail Locations

Author: |March 20, 2014

Staples, Inc. is the latest major retailer to announce that it will close a large number of its retail locations.

Staples To Close Many of Their Retail Locations

Staples, Inc. is the latest major retailer to announce that it will close a large number of its retail locations.

Staples plans to close 225 stores, while Sears Holdings will shutter 500 locations, including its flagship Chicago store.

The recent announcements are likely only the tip of the iceberg. According to a recent CNBC report, retail square footage will see a decrease of between one-third and one-half within the next five to 10 years.

With the growing competition from online retailers like Amazon.com, brick and mortar stores are losing money in droves. Shoppers who still like to shop “in person” are also frequenting outdoor malls and outlet centers over traditional malls.

Not surprisingly, the mass exodus is expected to have a significant impact on commercial leasing over the next several years. While the market for office space has slowly rebounded from recession lows, the commercial market for retail space will likely continue to plummet as retailers downsize their square footage or close stores altogether.

For retailers that are still in the position to sign a new commercial lease or negotiate a extension, the ball is certainly in your court. To gain the most negotiating power, it is imperative to do your homework to determine how much vacant space exists; how long the space has remained vacant; and other market conditions in the area. All of these factors will influence your value to the landlord and the likelihood of securing concessions and other favorable terms.

Landlords should also be prepared to be flexible. Given the unpredictability in the retail market, 15-20 year leases may be a thing of the past. Instead, landlords may have to offer short-term leases with an option to renew or long-term leases that contain an early termination clause in order to secure tenants.

If you have any questions about retail leases or would like to discuss additional commercial real estate concerns, please contact me, Victor Kinon, or the Scarinci Hollenbeck attorney with whom you work. 

Staples To Close Many of Their Retail Locations

Author:

Staples plans to close 225 stores, while Sears Holdings will shutter 500 locations, including its flagship Chicago store.

The recent announcements are likely only the tip of the iceberg. According to a recent CNBC report, retail square footage will see a decrease of between one-third and one-half within the next five to 10 years.

With the growing competition from online retailers like Amazon.com, brick and mortar stores are losing money in droves. Shoppers who still like to shop “in person” are also frequenting outdoor malls and outlet centers over traditional malls.

Not surprisingly, the mass exodus is expected to have a significant impact on commercial leasing over the next several years. While the market for office space has slowly rebounded from recession lows, the commercial market for retail space will likely continue to plummet as retailers downsize their square footage or close stores altogether.

For retailers that are still in the position to sign a new commercial lease or negotiate a extension, the ball is certainly in your court. To gain the most negotiating power, it is imperative to do your homework to determine how much vacant space exists; how long the space has remained vacant; and other market conditions in the area. All of these factors will influence your value to the landlord and the likelihood of securing concessions and other favorable terms.

Landlords should also be prepared to be flexible. Given the unpredictability in the retail market, 15-20 year leases may be a thing of the past. Instead, landlords may have to offer short-term leases with an option to renew or long-term leases that contain an early termination clause in order to secure tenants.

If you have any questions about retail leases or would like to discuss additional commercial real estate concerns, please contact me, Victor Kinon, or the Scarinci Hollenbeck attorney with whom you work. 

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