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Some Owners Hold the Line on Concessions

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From Reuters Shop Talk blog. DDR COO Daniel Hurwitz says some retailers are exaggerating how well they're doing in getting concessions from landlords and that DDR, for one, has been stingy--only acquiescing on 3 percent of the requests it has received so far. We explored this issue in an online feature about a month ago. I'm not sure how I feel about Hurwitz's comments here. I know landlords need to maintain NOI, but the fact of the matter is rents have been rising for years and probably got too high at the end of this boom. In an environment where retail sales are collapsing, declining rents make sense. Some retailers may be trying to take advantage of the situation and may not need concessions. That I understand. Other retailers are in so much trouble that they may not make it through this downturn if you give them the relief. But there's got to be a segment of retailers out there that legitimately requires relief in order to survive now that will thrive later. Is that number 3 percent?

“There is a disconnect between tenants and landlords regarding the number of requests that are actually granted,” he said.

To date, Developers Diversified has received 672 requests for rent relief, rent abatement and rent referrals, with 78 percent of those requests coming from local tenants and the remainder from national tenants.

“Many retailers and their advisers will tell you they are successful in renegotiating the lease terms; however to date, we have granted only 20 rent relief requests, or less than 3% of the total requests received,” Hurwitz said. “The typical concession is for a period of one year and it is generally in the form of a deferred payment.

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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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