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Restaurants Get Better Leases

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AP reporter (and frequent Retail Traffic contributor) Lauren Shepherd has an interesting story about how restaurants are negotiating for better terms from landlords. Landlords are pushing back, however.

"Landlords are being fairly aggressive now," said David Litchman, chief executive of Pockets, a sandwich and salad chain based in Chicago. "Now we're getting many, many more deals come across the table."

As gas prices have jumped to record levels and confidence in the economy has tanked among consumers, spending has slowed down and led to lower sales and profits at restaurants and retailers. That's led to some pain for landlords, because companies have less money to expand.

Meanwhile, lenders have become more cautious on extending credit to restaurant franchisees, further constraining growth in the industry.

With less credit available and a decline in growth overall for restaurants, landlords have been more willing to offer incentives like tenant improvement packages, in which a landlord offers tenants money to improve the property in exchange for a lease.

Some landlords, meanwhile, are keeping rents consistent rather than raising them.

"They're saying, 'If we can just hold our own for a year or two, we'll kind of be out of the woodwork'," said leasing consultant Dale Willerton, CEO of The Lease Coach.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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