The days of long-term retail leases may be over

Jamestown’s Michael Phillips says “the days of being the landlord as an overlord to collect rent are over”

TRD NATIONAL /
May.May 06, 2020 02:00 PM
 Jamestown’s Michael Phillips says, “the days of being the landlord as an overlord to collect rent are over.” (Credit: Phillips by Karjean Levine/Getty Images)

Jamestown’s Michael Phillips says, “the days of being the landlord as an overlord to collect rent are over.” (Credit: Phillips by Karjean Levine/Getty Images)

As retailers and other businesses seek relief from landlords, one potential long-term fix to rent woes is on the horizon.

Michael Phillips, who leads real estate investment manager Jamestown, told the Wall Street Journal that the days of reliance on standard long-term leases with fixed payments in retail are done.

“The days of being the landlord as an overlord to collect rent are over,” he said. The landlord said he expects to see more revenue sharing agreements and short-term leases as stores reopen when social distancing measures are relaxed. Phillips said Jamestown, whose holdings include Industry City and One Times Square, has set aside $50 million for loans and aid to its tenants.

Revenue-sharing models aren’t new, but they aren’t the norm either. That’s largely due to lenders offering better loan terms for properties with fixed-term leases, as those types of investment are considered more stable.

In recent years, some co-working companies including WeWork and Industrious have shifted from traditional fixed-term leases to revenue-sharing agreements, as have some retailers, hotel and mall operators. At Hudson Yards, many retail tenants, including Neiman Marcus, pay Related Companies a percentage of sales in lieu of a fixed rent.

While some are skeptical, others believe that coronavirus has shown a need for flexibility when it comes to leases. Though rent is a fixed cost, revenues can drop dramatically — as the economic shutdown has made apparent.

“Most epidemiologists don’t believe this is the last” pandemic,” Naveen Jaggi, president of retail advisory services at JLL, told the Journal. “You better build your business plan to accommodate future disruptions.” [WSJ] — Erin Hudson


Related Articles

arrow_forward_ios
An aerial view of a pop-up drive-in theater built in the parking lot at the Broadway Commons in Hicksville, New York (Getty)

Covid pummeled shopping centers, but their parking lots are thriving

Covid pummeled shopping centers, but their parking lots are thriving
The number of mortgage borrowers in Covid-19 forbearance plans ticked down again this week. (iStock)

3M homeowners remain in forbearance

3M homeowners remain in forbearance
Mayor Bill de Blasio and the Lucerne Hotel at  201 West 79th Street (Getty; iStock; Google Maps)

Lawsuit blasts NYC’s “capricious” Covid-19 homeless response

Lawsuit blasts NYC’s “capricious” Covid-19 homeless response
Gap CEO Sonia Syngal (Getty)

Gap Inc. will close 350 stores and exit malls entirely

Gap Inc. will close 350 stores and exit malls entirely
(iStock)

Dead weight: A breakdown of NYC’s rental listing glut

Dead weight: A breakdown of NYC’s rental listing glut
The National Multifamily Housing Council’s monthly payment tracker found that 90.6 percent of those households paid some rent by Oct. 20. (iStock)

Rent collections in market-rate apartments stagnate in October

Rent collections in market-rate apartments stagnate in October
Gov. Andrew Cuomo (Getty; iStock)

New York City lifts lockdown for some Covid hot spots

New York City lifts lockdown for some Covid hot spots
518 Broadway (Google Maps)

Four years vacant: Landlord offers dire outlook for Soho building

Four years vacant: Landlord offers dire outlook for Soho building
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...