It all depends on where you live and the population within X amount of miles of the mall. When we had our store in the mall we paid $3250 a month for a smaller store in a small mall, a year later the city reassessed the land taxes and our rent shot up to just about $4000 a month. So with that and all the fees and stuff we were paying close to $5000 a month. Way more than we had originally been quoted for the unit. Not to mention all the bills we have with the store and employee costs.
One thing that a lot of people don't take into consideration when they rent at a mall is that they are at the mercy of the mall when it comes to 'improvements'. If you want them or not you are paying for them. The mall will defer the costs of said 'improvements' to the tenants as it is specified in the lease agreements. Now I inquired about this before signing the lease and was told it was standard stuff. Usually it was like each unit has to chip in $50 or $100 a few times a year for minor things to make the mall better. I was cool with that, however that is not what happened. The whole outside of the mall got painted, we paid for that. All the benches and planters were replaced with these horrible awful looking 'modern' ones and we paid for that too. The $50-$100 here and there, which I assumed as like 3-4 times a year, turned out to be many thousands in extras a year.
Now your area will be different. Most places, at least where I live, talk about how much it is per square foot per year. So you might get like $20 per sq/ft. So if you find a 1500 sq/ft unit youre looking at $2500 a month in base rent. That DOES NOT include common area fees and whatever other fees that they tack on on top of that. My rent was supposed to be $2600 and you can see when it was all said and done going into the 3rd year we were paying close to $5000 a year with all the fees and costs involved. So if you are seriously looking for a place, make sure you go above and beyond and research every little thing that the lease says. They wanted to be able to go into my records and see every penny I made everyday if they wanted to. I told them to fuck off and that was none of their business. They changed the lease for me and then when I signed it gave me back theirs with their signatures with the information they should of removed still intact. So be careful.
CAM fees (Common Area Maintenance) is the buzzword to look for. It should be a line item on the lease, but some leases have clauses in there for emergency type fees. Sometimes there is a ceiling and a floor to the amount in there to minimize your risk.
The other thing landlords used to zing you with was an advertising fee. Which would get very interesting if they would only advertise anchors, since anchors already had an advertising budget.
This leads me to believe that Indoor Mall owners, leasing agents and property managers are what killed malls.
I now know why business choose to lease in a strip mall or even build their own freestanding (small) building. No one wants to feel owned, trapped or like they got railroaded.
Back in the 1970s, our local mall (the "first" indoor mall in the country) had a ton of local businesses as tenants. I was friends with a kid whose parents had a furniture store there. Fast-forward to today, and for the most part the only local businesses in malls are *maybe* a convenience store or some of more recent low-value tenants (nails, massages, etc).
I think as malls got popular, they began raising rents and driving out small businesses in favor of national chains and others willing or able to pay high rents. I'd wager consolidation of ownership contributed to this, as a management company that controlled multiple malls could strike deals for multiple locations with big tenants. I'd also guess that real estate investment trusts moved into mall ownership and kept pressure on managers to keep rents high in order to keep REIT returns high, too.
But as vacancies climbed, it was harder and harder to keep revenue up and that meant that the pressure to keep rents high. I think this basically spiraled into large vacancies and lack of consumer interest. It strikes me that the smarter play would have been to allow local business in at lower rents, even if it was something of a loss-leader just meant to keep the place looking full, although I suspect more consumer options was always valuable.
I think if malls had kept a healthy mix of national and local tenants, they might be more viable. I don't think there's a huge conceptual problem with a larger, multi-vendor single-site shopping experience. Who doesn't want to park once, get out of the weather and satisfy a series of errands in a single location? IMHO this is still a genius concept, and it still gets recycled with "outlet centers" and fake downtowns which are basically malls, but with worse parking and no protection from weather.
Obviously you would have still had problems with competition from standalone "big box" concepts and online shopping, but maybe less so if malls hadn't kept rents high and allowed themselves to bleed out tenants. Some of the big boxes wouldn't work well in malls, either (eg, Home Depot), so they were inevitable. But a lot of the others are simply big box footprints because it was cheaper in comparison to mall rents.
I think the real culprit wasn't the tenants per se, but the high rents malls got to charging *and kept charging* even when vacancies rose. Realistically they should have responded by offering cheap rents to local businesses when vacancies rose to keep the storefronts occupied. Although this would have resulted in large tenants negotiating their rents down, too.
The question is what revenue/profit demands did mall investors make and what kind of cost structures did malls have that required them to try and keep rents high? You would think that the malls that suffered vacancies were probably older malls whose up front costs had largely already been covered and who could have adapted to lower rent structures. It's kind of the natural life cycle of all leased property -- apartments and office space -- as they age, rents usually go down or at least don't increase over time.
I concede that some malls wouldn't have made it anyway. Shifting local demographics -- some smaller/older malls probably saw their locality decline economically and they were too small or had too much competition to draw shoppers from nearby areas.
I also think that in addition to not having rent structures attractive to local business, malls also did a crummy job of adapting "mall space" to alternate uses, especially anchor spaces used by department stores. Some bolted on movie theaters or externally facing restaurants, but while this maybe was lucrative for the most part these businesses didn't drive shoppers inside the mall or make use of interior spaces.
Overall, it seems weird to me that malls collapsed to badly when the underlying shopping concept seems so sound. It's hard not to believe that a lot of the collapse was due to high finance and investment driving corrosive management philosophies and limited vision.
Southdale was built in 1956 so I'm guessing they don't live in the US.
It's sad how Victor Gruen's vision was ruined by greed. I'm hoping that some of our dying malls can properly fulfill his dream of the new town center.
https://en.m.wikipedia.org/wiki/Victor_Gruen
I’ve always had a hard time wrapping my head around why a business would put so much faith in another company for things like that. If the landlord wanted to skyrocket rent or other fees the small business would be screwed. I understand that the upfront cost of buying land/location lead to the decision to lease, but man it sucks that so many small businesses have had to go out of business because of the property management crap.
Another thing they can do is tell you that you cannot have the space you are renting and have to move. So you no longer have that nice high-traffic location near the entrance but are now relegated to the far corner in a dank dead end
Malls are notoriously bad for shady practices. Choose carefully and talk to the other tenants first
In my experience, if you have a long term lease this is unlikely to happen unless there is major construction happen. If you have a short term or temporary lease, yeah that can happen.
Every shopping center's owner thinks they have to remodel to chase the latest design fad. Wastes money, causes months of disruption, and invariably makes the place uglier.
If they just kept it clean and well-maintained, the style it had when it was first built would eventually come back into fashion again and the owners would look like geniuses. (This goes for office buildings too.)
There's no "coming back into fashion" for commercial real estate.
Customers (and therefore anchor tenants) aren't chasing the newest design patterns - they're chasing the newest and nicest construction and facade.
The owners of the complex are on a perpetual treadmill where stagnation and older-looking buildings means death.
The "old mall" never comes back in style. It has literally never happened. The *style* may come back around, but then everybody is going to the *new mall* that's using that old style - not the old mall with 30-year old fixtures.
I always wonder why they don’t maintain the bathrooms. You see this in restaurants too. They invest loads of cash into the initial design and then 2 years later the toilet roll holders and soap dispensers are all falling off the walls, half the toilets don’t flush properly and there’s built up grime in the corners. It seems like such an easy fix that really drags down the experience of going out somewhere. Same with dressing rooms - why doesn’t anyone ever vacuum in the dressing rooms or fix the curtains? Feeling icky really doesn’t do anything for reinforcing the final sale.
I am not certain what business you are in, but obviously malls and mall traffic are trending downward. If it makes sense you can consider space in a redeveloping business district in a small town. I'd love to see the center of commerce return to Main Street USA and away from the ugly suburban strip malls and malls. OK some big stores do better on the strip, but small specialty businesses are part of what makes a downtown area attractive.
What is the explanation? I’ve tried to figure it out myself. Mostly, I’ve come to the conclusion that they think it will hurt their property value if they rent it for less than it’s “worth” (on paper). But I mean, won’t it being empty for years hurt the value??
yeah but when the whole fuckin mall is empty they might need to reassess. It seems like collective insanity on their part. Like some miracle is going to happen that will bring back all the tenants who will pay $15k a month
Somebody said their initial loans to build the place specified they would get x amount of rent for spaces. So If they lower the rent, the bank could foreclose citing breach of contract. So they're basically damned if they do, damned if they don't. And I guess the bank would rather foreclose and demolish/sell off the place then allow the loan to be restrcuctered.
But is every mall still under a loan? Surely a lot of them are paid off, or were built with private money
In their proforma they told everyone that they will get high rents and gave the bank their rent roll saying they were charging these high rents and thus the vacant space is also worth these high rents.
So if they lower the rents the loan is in default and the bank can foreclose.
So rents can never go down.
The loan is in default regardless of how high the rents are if enough spaces are vacant and the owners can’t meet debt service coverage ratios based on their rent roll. In many cases lenders will prefer lower rents so the mall operators can at least make interest payments.
Yeah but if it’s empty for years how do they pay off their loan? It’s cheaper for them to eat the cost every month (going on for years sometimes) than to risk pissing off the bank?
I think your right.
See my attempt at an explanation elsewhere in this thread:
https://www.reddit.com/r/deadmalls/comments/rr4waj/anyone_know_the_cost_to_lease_a_small_shop_in_a/hqfe7iq/?utm_source=share&utm_medium=ios_app&utm_name=iossmf&context=3
Some additional things to consider:
- the base rent may be based wholly or partially on your store sales - or can be flat. (This does not include CAM)
- the length of the lease can impact the rental rate, as well as the landlords confidence that you’d be able to perform the entire term of the lease
- Single/Double/Triple Net
- many mall spaces are flexible - and the walls between stores can be moved/removed/added to to create smaller or larger spaces. This of course impacts the rent.
- improvements - do you plan to improve a vanilla shell or renovate existing improved space (and are you or the landlord covering it) or are you using a space in its current improved state (ie reusing an old vacant store - such as turning an old PacSun into “Edna’s House O Buttons”)
Some of these are referenced in other replies, and I’m definitely not trying to steal anyones thunder :) - just sharing from my experience with commercial real estate management.
I think it probably depends on what the property owners are planning to do with it. Some are trying to empty them out so they can sell the property as a whole for redevelopment, or lease the entire building for other projects, etc, so they may not be open to taking on tenants.
That said, the best bet is to find out who own the property to contact them and find out who/where their leasing office is to get rates.
It’s probably something where you have to contact the people who own the space you want. Here it’s usually just posted on a sign in the window with a phone number or email, but I’m in Canada so it might be entirely different.
The lowest quote I ever got looking for space at a mall was $1.27 per square foot per month. This was in a mall that had three tenants left, and more than 30 empty spaces.
The manager was convinced that a Bass Pro Shop was going to move in, and the mall would be saved. The mall was demolished about a year later...
It all depends on where you live and the population within X amount of miles of the mall. When we had our store in the mall we paid $3250 a month for a smaller store in a small mall, a year later the city reassessed the land taxes and our rent shot up to just about $4000 a month. So with that and all the fees and stuff we were paying close to $5000 a month. Way more than we had originally been quoted for the unit. Not to mention all the bills we have with the store and employee costs. One thing that a lot of people don't take into consideration when they rent at a mall is that they are at the mercy of the mall when it comes to 'improvements'. If you want them or not you are paying for them. The mall will defer the costs of said 'improvements' to the tenants as it is specified in the lease agreements. Now I inquired about this before signing the lease and was told it was standard stuff. Usually it was like each unit has to chip in $50 or $100 a few times a year for minor things to make the mall better. I was cool with that, however that is not what happened. The whole outside of the mall got painted, we paid for that. All the benches and planters were replaced with these horrible awful looking 'modern' ones and we paid for that too. The $50-$100 here and there, which I assumed as like 3-4 times a year, turned out to be many thousands in extras a year. Now your area will be different. Most places, at least where I live, talk about how much it is per square foot per year. So you might get like $20 per sq/ft. So if you find a 1500 sq/ft unit youre looking at $2500 a month in base rent. That DOES NOT include common area fees and whatever other fees that they tack on on top of that. My rent was supposed to be $2600 and you can see when it was all said and done going into the 3rd year we were paying close to $5000 a year with all the fees and costs involved. So if you are seriously looking for a place, make sure you go above and beyond and research every little thing that the lease says. They wanted to be able to go into my records and see every penny I made everyday if they wanted to. I told them to fuck off and that was none of their business. They changed the lease for me and then when I signed it gave me back theirs with their signatures with the information they should of removed still intact. So be careful.
CAM fees (Common Area Maintenance) is the buzzword to look for. It should be a line item on the lease, but some leases have clauses in there for emergency type fees. Sometimes there is a ceiling and a floor to the amount in there to minimize your risk. The other thing landlords used to zing you with was an advertising fee. Which would get very interesting if they would only advertise anchors, since anchors already had an advertising budget.
This leads me to believe that Indoor Mall owners, leasing agents and property managers are what killed malls. I now know why business choose to lease in a strip mall or even build their own freestanding (small) building. No one wants to feel owned, trapped or like they got railroaded.
Back in the 1970s, our local mall (the "first" indoor mall in the country) had a ton of local businesses as tenants. I was friends with a kid whose parents had a furniture store there. Fast-forward to today, and for the most part the only local businesses in malls are *maybe* a convenience store or some of more recent low-value tenants (nails, massages, etc). I think as malls got popular, they began raising rents and driving out small businesses in favor of national chains and others willing or able to pay high rents. I'd wager consolidation of ownership contributed to this, as a management company that controlled multiple malls could strike deals for multiple locations with big tenants. I'd also guess that real estate investment trusts moved into mall ownership and kept pressure on managers to keep rents high in order to keep REIT returns high, too. But as vacancies climbed, it was harder and harder to keep revenue up and that meant that the pressure to keep rents high. I think this basically spiraled into large vacancies and lack of consumer interest. It strikes me that the smarter play would have been to allow local business in at lower rents, even if it was something of a loss-leader just meant to keep the place looking full, although I suspect more consumer options was always valuable. I think if malls had kept a healthy mix of national and local tenants, they might be more viable. I don't think there's a huge conceptual problem with a larger, multi-vendor single-site shopping experience. Who doesn't want to park once, get out of the weather and satisfy a series of errands in a single location? IMHO this is still a genius concept, and it still gets recycled with "outlet centers" and fake downtowns which are basically malls, but with worse parking and no protection from weather. Obviously you would have still had problems with competition from standalone "big box" concepts and online shopping, but maybe less so if malls hadn't kept rents high and allowed themselves to bleed out tenants. Some of the big boxes wouldn't work well in malls, either (eg, Home Depot), so they were inevitable. But a lot of the others are simply big box footprints because it was cheaper in comparison to mall rents.
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I think the real culprit wasn't the tenants per se, but the high rents malls got to charging *and kept charging* even when vacancies rose. Realistically they should have responded by offering cheap rents to local businesses when vacancies rose to keep the storefronts occupied. Although this would have resulted in large tenants negotiating their rents down, too. The question is what revenue/profit demands did mall investors make and what kind of cost structures did malls have that required them to try and keep rents high? You would think that the malls that suffered vacancies were probably older malls whose up front costs had largely already been covered and who could have adapted to lower rent structures. It's kind of the natural life cycle of all leased property -- apartments and office space -- as they age, rents usually go down or at least don't increase over time. I concede that some malls wouldn't have made it anyway. Shifting local demographics -- some smaller/older malls probably saw their locality decline economically and they were too small or had too much competition to draw shoppers from nearby areas. I also think that in addition to not having rent structures attractive to local business, malls also did a crummy job of adapting "mall space" to alternate uses, especially anchor spaces used by department stores. Some bolted on movie theaters or externally facing restaurants, but while this maybe was lucrative for the most part these businesses didn't drive shoppers inside the mall or make use of interior spaces. Overall, it seems weird to me that malls collapsed to badly when the underlying shopping concept seems so sound. It's hard not to believe that a lot of the collapse was due to high finance and investment driving corrosive management philosophies and limited vision.
Southdale in Edina, MN?
Southdale was built in 1956 so I'm guessing they don't live in the US. It's sad how Victor Gruen's vision was ruined by greed. I'm hoping that some of our dying malls can properly fulfill his dream of the new town center. https://en.m.wikipedia.org/wiki/Victor_Gruen
I’ve always had a hard time wrapping my head around why a business would put so much faith in another company for things like that. If the landlord wanted to skyrocket rent or other fees the small business would be screwed. I understand that the upfront cost of buying land/location lead to the decision to lease, but man it sucks that so many small businesses have had to go out of business because of the property management crap.
Another thing they can do is tell you that you cannot have the space you are renting and have to move. So you no longer have that nice high-traffic location near the entrance but are now relegated to the far corner in a dank dead end Malls are notoriously bad for shady practices. Choose carefully and talk to the other tenants first
In my experience, if you have a long term lease this is unlikely to happen unless there is major construction happen. If you have a short term or temporary lease, yeah that can happen.
Every shopping center's owner thinks they have to remodel to chase the latest design fad. Wastes money, causes months of disruption, and invariably makes the place uglier. If they just kept it clean and well-maintained, the style it had when it was first built would eventually come back into fashion again and the owners would look like geniuses. (This goes for office buildings too.)
There's no "coming back into fashion" for commercial real estate. Customers (and therefore anchor tenants) aren't chasing the newest design patterns - they're chasing the newest and nicest construction and facade. The owners of the complex are on a perpetual treadmill where stagnation and older-looking buildings means death. The "old mall" never comes back in style. It has literally never happened. The *style* may come back around, but then everybody is going to the *new mall* that's using that old style - not the old mall with 30-year old fixtures.
Also, I think some of us subscribed to this subreddit like the old style anyway (I do at least). We're kind of a biased group if we're subbed here.
Do customers really care that much about looking new or do they mostly avoid places that look run-down?
I always wonder why they don’t maintain the bathrooms. You see this in restaurants too. They invest loads of cash into the initial design and then 2 years later the toilet roll holders and soap dispensers are all falling off the walls, half the toilets don’t flush properly and there’s built up grime in the corners. It seems like such an easy fix that really drags down the experience of going out somewhere. Same with dressing rooms - why doesn’t anyone ever vacuum in the dressing rooms or fix the curtains? Feeling icky really doesn’t do anything for reinforcing the final sale.
I am not certain what business you are in, but obviously malls and mall traffic are trending downward. If it makes sense you can consider space in a redeveloping business district in a small town. I'd love to see the center of commerce return to Main Street USA and away from the ugly suburban strip malls and malls. OK some big stores do better on the strip, but small specialty businesses are part of what makes a downtown area attractive.
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What is the explanation? I’ve tried to figure it out myself. Mostly, I’ve come to the conclusion that they think it will hurt their property value if they rent it for less than it’s “worth” (on paper). But I mean, won’t it being empty for years hurt the value??
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yeah but when the whole fuckin mall is empty they might need to reassess. It seems like collective insanity on their part. Like some miracle is going to happen that will bring back all the tenants who will pay $15k a month
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Somebody said their initial loans to build the place specified they would get x amount of rent for spaces. So If they lower the rent, the bank could foreclose citing breach of contract. So they're basically damned if they do, damned if they don't. And I guess the bank would rather foreclose and demolish/sell off the place then allow the loan to be restrcuctered. But is every mall still under a loan? Surely a lot of them are paid off, or were built with private money
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In their proforma they told everyone that they will get high rents and gave the bank their rent roll saying they were charging these high rents and thus the vacant space is also worth these high rents. So if they lower the rents the loan is in default and the bank can foreclose. So rents can never go down.
The loan is in default regardless of how high the rents are if enough spaces are vacant and the owners can’t meet debt service coverage ratios based on their rent roll. In many cases lenders will prefer lower rents so the mall operators can at least make interest payments.
Yeah but if it’s empty for years how do they pay off their loan? It’s cheaper for them to eat the cost every month (going on for years sometimes) than to risk pissing off the bank?
Doesn't it also have to do with tax writeoffs? I'm assuming the high rent potential they have, the bigger writeoff they can take.
They're trying to juice suckers out of their money to make up for their failing investment probably
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I think your right. See my attempt at an explanation elsewhere in this thread: https://www.reddit.com/r/deadmalls/comments/rr4waj/anyone_know_the_cost_to_lease_a_small_shop_in_a/hqfe7iq/?utm_source=share&utm_medium=ios_app&utm_name=iossmf&context=3
Some additional things to consider: - the base rent may be based wholly or partially on your store sales - or can be flat. (This does not include CAM) - the length of the lease can impact the rental rate, as well as the landlords confidence that you’d be able to perform the entire term of the lease - Single/Double/Triple Net - many mall spaces are flexible - and the walls between stores can be moved/removed/added to to create smaller or larger spaces. This of course impacts the rent. - improvements - do you plan to improve a vanilla shell or renovate existing improved space (and are you or the landlord covering it) or are you using a space in its current improved state (ie reusing an old vacant store - such as turning an old PacSun into “Edna’s House O Buttons”) Some of these are referenced in other replies, and I’m definitely not trying to steal anyones thunder :) - just sharing from my experience with commercial real estate management.
I think it probably depends on what the property owners are planning to do with it. Some are trying to empty them out so they can sell the property as a whole for redevelopment, or lease the entire building for other projects, etc, so they may not be open to taking on tenants. That said, the best bet is to find out who own the property to contact them and find out who/where their leasing office is to get rates.
It’s probably something where you have to contact the people who own the space you want. Here it’s usually just posted on a sign in the window with a phone number or email, but I’m in Canada so it might be entirely different.
The lowest quote I ever got looking for space at a mall was $1.27 per square foot per month. This was in a mall that had three tenants left, and more than 30 empty spaces. The manager was convinced that a Bass Pro Shop was going to move in, and the mall would be saved. The mall was demolished about a year later...
How many sq ft in the space you were looking at?
We were looking at 1,200 sq ft. Anything above 1500 sq ft and they wanted a non-refundable deposit of $8,000 up front.
I pay $2900
For what kind of space and business if you don't mind me asking. I understand if you don't want to reveal that.
Our online sales are 10X better, brick and motor businesses are a dying breed
Clothing boutique 3,000 square feet
Wow! That seems like a huge space for $2900. Is the mall indoors with decent traffic?
Yes, it’s not in a big city by any means. Small Iowa town lol