In my last blog, I addressed the age-old face-off between neighborhood traditions and the legal
principal of property rights in the pending eviction of the fifty year old Gold Dust Lounge from its Union Square perch in San Francisco. But there is more to this story…
The tenants, two elderly brothers both in their advanced 80s, claim the landlord snuck
subtle changes into the termination clause in their annual lease renewal agreements. What started out to be a right to terminate with 18 months written notice if the building was slated for
demolition evolved into a 90 day notice to terminate the lease for any reason at all. The tenants, desperate for a case to sue the landlord over this apparent chicanery, are claiming “elder financial abuse”. They say the landlord induced them to sign the annual renewals assuring them that “nothing material had changed” [quote from Los Angeles Times reporting].
The tenants could have a case here, but if they were competent enough to operate their business successful from day to day, they were ostensibly competent enough to read and understand the short renewal document they signed each year. There is no better illustration of a tenant’s responsibility to know what is in their lease and understand the impact of each and every lease clause, or at least to utilize experienced resources like a good tenant rep broker to look out for their best interests.
Is there really any argument here?
Friday, March 30, 2012
Sunday, March 25, 2012
GOLD DUST DISAPPEARS IN A PUFF OF HOT AIR
The news that the ostensibly famous San Francisco saloon The Gold Dust Lounge is being
booted out by their landlord after 50 years near Union Square in favor of The
Limited has made headlines. Events like this underscore the juxtaposition of neighborhood culture and market opportunity, forces that often find themselves at cross purposes. Arguments on both sides have merit. But movements to have city planners or elected officials step in are simply wrong. Very wrong.
The law of the land is clear enough on private property rights. The marketplace will dictate what business goes in a given location. Miscalculations and bad judgment often intervene, but in the end, the market – which includes landlords, business tenants, and consumers – ultimately decides the future of the neighborhood. Free market forces do not always move in a straight, true line.
There is another side of this story that will be addressed in my next blog and has to do with paying close attention to lease terms. Did the landlord take advantage of the tenant’s naiveté to get them out of the space? We shall examine the facts.
booted out by their landlord after 50 years near Union Square in favor of The
Limited has made headlines. Events like this underscore the juxtaposition of neighborhood culture and market opportunity, forces that often find themselves at cross purposes. Arguments on both sides have merit. But movements to have city planners or elected officials step in are simply wrong. Very wrong.
The law of the land is clear enough on private property rights. The marketplace will dictate what business goes in a given location. Miscalculations and bad judgment often intervene, but in the end, the market – which includes landlords, business tenants, and consumers – ultimately decides the future of the neighborhood. Free market forces do not always move in a straight, true line.
There is another side of this story that will be addressed in my next blog and has to do with paying close attention to lease terms. Did the landlord take advantage of the tenant’s naiveté to get them out of the space? We shall examine the facts.
Monday, March 19, 2012
THE WALMART CONUNDRUM
I attended a
very informative presentation recently by a senior regional Walmart
representative seeking the endorsement of the Central City Association of Los
Angeles, a citywide business advocacy group. Walmart has been rolling out their small-format Neighborhood Market concept (+/-35,000 s.f.) and their recently announced plan to put one in on the fringes of Chinatown in downtown Los Angeles was met with howls of protest. The representative put up a PowerPoint presentation chock full of dazzling statistics about Walmart’s incredibly diverse employee population, their better-than-average pay scale, and the
fantastic value they bring to their customers. The presentation felt like a defensive move in the face of “NIMBY” resistance they seem to get from so many cities. They are eager to prove they are a responsible, good neighbor dedicated to serving the needs and desires of the shopping population.
The presentation left me with the distinct impression that the world’s largest retailer sees the entire population of the world as either as employees, customers, or suppliers. The conundrum
is that while they pursue their noble goal of bringing their customers good products at the lowest prices, there are many ordinary people in these communities who chose to be business owners instead. And they just can’t survive when Walmart comes to town.
I am sure this grocery-deficient neighborhood will gobble up what Walmart has to offer. And a few family-owned shops and markets will close.
very informative presentation recently by a senior regional Walmart
representative seeking the endorsement of the Central City Association of Los
Angeles, a citywide business advocacy group. Walmart has been rolling out their small-format Neighborhood Market concept (+/-35,000 s.f.) and their recently announced plan to put one in on the fringes of Chinatown in downtown Los Angeles was met with howls of protest. The representative put up a PowerPoint presentation chock full of dazzling statistics about Walmart’s incredibly diverse employee population, their better-than-average pay scale, and the
fantastic value they bring to their customers. The presentation felt like a defensive move in the face of “NIMBY” resistance they seem to get from so many cities. They are eager to prove they are a responsible, good neighbor dedicated to serving the needs and desires of the shopping population.
The presentation left me with the distinct impression that the world’s largest retailer sees the entire population of the world as either as employees, customers, or suppliers. The conundrum
is that while they pursue their noble goal of bringing their customers good products at the lowest prices, there are many ordinary people in these communities who chose to be business owners instead. And they just can’t survive when Walmart comes to town.
I am sure this grocery-deficient neighborhood will gobble up what Walmart has to offer. And a few family-owned shops and markets will close.
Monday, March 12, 2012
STREET FRONT OR SHOPPING CENTER?
The renaissance of central business districts like Downtown Los Angeles are challenging many precepts of what makes for a strong retail location. So many franchise brands were born and cultivated in the suburbs. Urban locations are considered non-traditional and relegated to the “B” list. Urban core locations do not align with features found in typical suburban shopping center locations.
The differences include daytime population versus resident population, modes of transportation, and the biggest amongst them, parking. The thought of putting a store in a building with no dedicated parking would scare most corporate vice presidents of real estate to death.
But while the rest of the franchise world frets, brands like Subway and Five Guys are gobbling up urban street front locations. Subway must have 10 locations in Downtown Los Angeles (where I live) and all of them are open 24 hours.
It’s time to think out of the parking lot, don’t you think?
Monday, March 5, 2012
WHAT DOES BUILDING IMAGE MATTER FOR YOUR BUSINESS?
Tenants often struggle with the building image factor of site selection, whether the site is retail, office, or industrial. While a good agent who has taken the time to really understand the client’s business can advise them, it is crucial to help them see the logical answer for themselves. And the determination of how much weight to put on curb appeal is indeed logical.
The experienced reader will certainly make the case for location over building image. This conventional wisdom is sound, but properties occupying better locations often maintain a higher image with respect to design and materials, if only to maximize the rent of their superior location. So for purposes of this brief missive, let’s assume location and image run parallel.
Building image absolutely filters through to the public’s perception of the business located within. If the desired perception of your business is sophistication, class, and quality of goods or
services, then tired, second-rate properties must be passed over. Chances are, the price point of your goods an services are higher, justifying the higher rent commanded by the building. If the desired perception is value and/or convenience, then the “B” or even “C” class buildings might be perfectly suitable for your business, given the owner maintains base standards of cleanliness, maintenance, and safety. These base standards must never be violated. A good real estate advisor will keep his or her clients mindful of this.
Warehousing and distribution tenants address the very same concerns. If the commodity is food products, better building image (and the higher level of building and common area maintenance
that usually accompanies them) are extremely important. If the commodity is recycled materials or galvanized pipe, then image could move in priority below other considerations, such as
truck ingress and egress and loading dock door dimensions, for example.
There are many options in any given market. Choose wisely…and logically.
The experienced reader will certainly make the case for location over building image. This conventional wisdom is sound, but properties occupying better locations often maintain a higher image with respect to design and materials, if only to maximize the rent of their superior location. So for purposes of this brief missive, let’s assume location and image run parallel.
Building image absolutely filters through to the public’s perception of the business located within. If the desired perception of your business is sophistication, class, and quality of goods or
services, then tired, second-rate properties must be passed over. Chances are, the price point of your goods an services are higher, justifying the higher rent commanded by the building. If the desired perception is value and/or convenience, then the “B” or even “C” class buildings might be perfectly suitable for your business, given the owner maintains base standards of cleanliness, maintenance, and safety. These base standards must never be violated. A good real estate advisor will keep his or her clients mindful of this.
Warehousing and distribution tenants address the very same concerns. If the commodity is food products, better building image (and the higher level of building and common area maintenance
that usually accompanies them) are extremely important. If the commodity is recycled materials or galvanized pipe, then image could move in priority below other considerations, such as
truck ingress and egress and loading dock door dimensions, for example.
There are many options in any given market. Choose wisely…and logically.
Friday, March 2, 2012
RETAIL TRENDS: DEPARTMENT STORE CHANGES AFOOT
The high-profile, large-scale barometer of retail health, the department store, is in flux. Three
of the biggest retail tenants on the planet all made print in the Wall Street Journal on February 24. Sears is shrinking, almost to the point of a retreat from the national-scale department
store class. Bloomingdales, the tony NewYork-based icon is adopting grocerystore marketing tactics, and J.C. Penney is touting a grand future.
Big pronouncements are nothing new from department stores. Their size assures them notice
from national media such as the WSJ and their corporate suites make the most of that. But it remains fascinating to see how this outsized model is evolving – some say devolving – from the days they were considered the pinnacle of retail merchandising. Nobody would doubt department stores are struggling to maintain relevance.
Sears will be closing – and in many cases selling – 1,200 stores across the nation in a last-ditch effort to stop the hemorrhaging from a futile attempt to reposition the chain pursuant to their merger with Kmart. The fact is that a venerable merchandising brand has been allowed to deteriorate from pure physical neglect. They have short-changed their physical plant, allowing their stores to deteriorate. Simple property management common sense. The only real value left there is in their great product brands, including Craftsman tools and Kenmore appliances. Whether they can rebuild on those nuggets is anyone’s guess.
Bloomingdales is ditching their branded credit card loyalty strategy for a bar code fob used by the major grocery chains. This doesn’t, in this writers view, detract at all from their upscale values. In a word, smart. And Ron Johnson, the new CEO of J.C. Penney, formerly of Target Corp and Apple, has pronounced department stores the “number 1 opportunity in American retail.”
But just like in the business world in general, the real work in retail is done on a small scale, on the shop level. As always, this is where new ideas, new energy, and the vast majority of retail jobs come from. And this is where we will find reliable indicators of a reemerging economy.
of the biggest retail tenants on the planet all made print in the Wall Street Journal on February 24. Sears is shrinking, almost to the point of a retreat from the national-scale department
store class. Bloomingdales, the tony NewYork-based icon is adopting grocerystore marketing tactics, and J.C. Penney is touting a grand future.
Big pronouncements are nothing new from department stores. Their size assures them notice
from national media such as the WSJ and their corporate suites make the most of that. But it remains fascinating to see how this outsized model is evolving – some say devolving – from the days they were considered the pinnacle of retail merchandising. Nobody would doubt department stores are struggling to maintain relevance.
Sears will be closing – and in many cases selling – 1,200 stores across the nation in a last-ditch effort to stop the hemorrhaging from a futile attempt to reposition the chain pursuant to their merger with Kmart. The fact is that a venerable merchandising brand has been allowed to deteriorate from pure physical neglect. They have short-changed their physical plant, allowing their stores to deteriorate. Simple property management common sense. The only real value left there is in their great product brands, including Craftsman tools and Kenmore appliances. Whether they can rebuild on those nuggets is anyone’s guess.
Bloomingdales is ditching their branded credit card loyalty strategy for a bar code fob used by the major grocery chains. This doesn’t, in this writers view, detract at all from their upscale values. In a word, smart. And Ron Johnson, the new CEO of J.C. Penney, formerly of Target Corp and Apple, has pronounced department stores the “number 1 opportunity in American retail.”
But just like in the business world in general, the real work in retail is done on a small scale, on the shop level. As always, this is where new ideas, new energy, and the vast majority of retail jobs come from. And this is where we will find reliable indicators of a reemerging economy.
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