With so much turmoil in the retail market, tenants are increasingly looking to do short-term deals.
Figures from CBRE show that since 2016, the number of retail leases inked for shorter than three years has increased dramatically, the Wall Street Journal reported.
Retailers are using the shorter terms to test out new locations and see where rents will go.
“The obvious positive on the tenant side is that they can test the market,” CBRE research manager Michael Slattery said.
CBRE counted 13 short-term retail leases in Manhattan in 2016. But by 2017 that figure had more than quadrupled to 53 deals. And 2018 is keeping pace with last year, with 28 short-term deals inked through the second quarter.
Soho, which has been hit hard by vacancies, had the heaviest concentration of short-term leases.
These kinds of deals can help landlords fill empty spaces and generate buzz for their properties, but they do pose a problem when building owners go to refinance or sell.
But landlords’ flexibility with short-term deals is helping improve leasing activity.
“It used to be landlords would dig in and wouldn’t back off rent that much, but now there are deals getting done,” SCG Retail’s David Firestein said. “It feels to me that the market is bottoming out.” [WSJ] — Rich Bockmann