Although the retail market in Los Angeles is stable, with a vacancy that hovers around 5%, some landlords are having trouble leasing spaces as ecommerce continues to eat into brick-and-mortar retail sales. One solution: pop-ups. A consistent stream of pop-up retailers, which sign short-term leases for anything from a day to a few months or even a year, can help occupy vacant retail spaces and drive traffic to a retail center. We sat down with CBRE VP Zachary Card, who has experience signing pop-up retailers, for an exclusive interview to find out why and when these are a good fit, how to structure a short-term lease and where the pop-up trend is heading.
GlobeSt.com: When are pop-ups a good fit for a shopping center or a retail landlord?
Zachary Card: Pop-ups are a great way to bring life to a challenged space that otherwise may stay un-occupied. Using pop-ups can draw in people while also serving as an incubator space for new concepts as well as for a national, regional or emerging online retailer that may not otherwise commit to a long-term lease without some proof of sales.
GlobeSt.com: How are pop-up leases structured differently than standard long-term retail leases?
Card: Pop-up leases can be structured month to month or be shorter term than a standard lease, such as for one or two years. The rent calculated can be a percentage of sales or a pre-negotiated aggregate monthly or annual amount. Generally, pop-up leases require less capital commitment from the landlord, such as a tenant-improvement allowance. Overall, pop-up lease agreements provide less capital exposure on both sides.
GlobeSt.com: Because pop-ups are short-term leases, how are frequent pop-ups factored into the cash-flow of a property, and can they affect financing or investor interest in the event of a sale?
Card: Typically, if a pop-up lease is less than a year or is structured on a month-to-month basis, there are no significant negative impacts to landlords or potential buyers.
GlobeSt.com: What is demand like for pop-up spaces, from the tenant side and is this demand increasing?
Card: We see a high demand for pop-up space, especially from emerging online retailers that want to test a brick-and-mortar model. Pop-ups are an important component in the evolution of retail. As the sector continues to change, the concept of omnichannel retailing is ever more prevalent, meaning retailers are leveraging both online and brick-and-mortar as part of their overall strategy. Pop-ups can be very helpful in figuring out a tactic and where and how to implement it.
GlobeSt.com: Can pop-ups be rotated in a single space, or are they a more short-term solution to a vacant unit?
Card: Pop-ups can be easily rotated. Rick Caruso has done a fabulous job in doing this at The Grove, for example. It provides for constant diversification of the merchandising mix and adds an element of excitement to the customer experience.
GlobeSt.com: What is your advice to landlords looking to sign a pop-up or turn a vacant unit into a pop-up shop?
Card: Be open-minded as pop-ups are probably here to stay! Be careful about committing too much capital into a deal without sufficient lease securitization. Pop-ups can be a win-win and add dimension to an otherwise challenged space or stagnant shopping experience.
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Kelsi Maree Borland
