With many retail stores, malls and shopping centers facing changes in consumer buying habits and the convenience of online shopping, many landlords and owners of commercial retail properties are looking at the best use of vacant spaces.
“Pop ups” are becoming a frequent option for many landlords and property managers to help address vacancies. Pop ups are typically short term tenants, not looking for a typical long term lease.
There are many benefits for having a pop for both the landlord and tenant, but all parties should be aware of potential issues before agreeing to a short term leases. Consulting with your broker and attorney can help you identify and prevent such issues.
As a pop up, leases are all short term leases, but can range between a day or so, up to several months. Occasionally, shorter term leases sometimes may be above market rate, and landlords / property managers still incur costs of cleaning, prepping and reletting the property out again. These costs in the long term can increase drastically versus their standard one year/multi-year lease counterparts. Hence higher market rental rates help cut costs associated with preparing the property for a new tenant. If the tenant is looking for a very nightly or weekend pop up, the costs may be perhaps in line as a prorated rental fee; it depends on area, usage and demand.
One of the reasons pop ups have become popular is for an alternative event type space. These types of renters typically are events, art programs, professional type functions or even private events where an event space or banquet hall is too large, too expensive or not just not feasible. Retail stores typically around 2,000 sf offer a sweet spot for many pop up tenants looking for space for a nightly, weekend, or weekly type venue. An example would be satellite art fairs.
At Art Basel Miami Beach, one of the country’s largest art fair, many satellite art fairs exhibit during the same week. Aqua, a Satellite fair, rents out a hotel. Each independent artist or gallery gets 1~2 hotel rooms which is converted into a gallery space for them to showcase work. This example of a pop up is more extreme as it benefits from the large crowds, and the added responsibility of clearing out each hotel room to be converted into a gallery space.
Some pop ups are seasonal. Millennium Park features a rink that is iced down and used as an ice skating venue during the winter season. The Loop Alliance in Chicago rents out alleyways in the city to host an art and performance event throughout the summer. Definitely worthwhile to check out if you haven’t already.
Pop ups are not just relegated to fairs, and such very short term leases. But as their name indicates – their sole purpose is to pop in and out of a space. Though some pop ups can go for months, typically they are far less than that.
When preparing for a popup, there are many factors to take into consideration. These are things to discuss with your representing attorney and broker. Typically, issues like deposits / damages, insurance, liability, construction, utilities, are just some of the things that should be addressed. Depending on the type of business or planned use, some of the related costs could increase (a popup open to the public may incur higher insurance rates, versus a private event for a handful of people).
Successful pop ups in ideal locations can also bring attention to the retail venue as well. Though retail vacancies are up, many landlords and property managers are not accustomed to such short term leases. Those who are, could benefit from a larger pool of potential renters, helping offset costs a vacant space would create.