In an attention-grabbing move to fill empty retail space at a mixed-use downtown Hollywood condominium project, the leasing agent has awarded two years of free rent to a new business tenant.
The theory in a depressed market, it seems to be, is that if you’ve built it and given some away, they will come. In a market with 25 percent vacancy rates downtown, every little bit helps.
A retail store specializing in products made from alligator skin is scheduled to open in mid-October after being chosen out of nearly 100 applicants to fill a vacant, 1,741-square-foot retail space in the Radius Condominium project.
The 15-story, $70 million 311-unit development off Young Circle in downtown Hollywood was once hailed as the flagship of downtown redevelopment. But the building opened in 2007 just as the condo bubble started collapsing and its fortunes were tossed into the market maelstrom.
Empty apartments sit above 45,000 square feet of ground-floor retail space, around half of which remains vacant.
The leasing agent, Robin Roberts of Firm Realty, estimated that contest winning merchant All American Gator Products will receive $96,000 worth of rent over two years, with no obligation to sign a new lease in 2011.
Roberts hopes the arrangement will help spur the rental of vacant retail space in the Radius project or in other parts of downtown Hollywood. Even with All American Gator opening next month, five of the 11 storefronts at the ground-level Radius parking garage building are vacant. Playing up the alligator emporium is one way to address that, she said.
“We exposed a lot of potential new businesses to the Radius and downtown Hollywood,’’ she said.
However, commercial real estate professionals said the giveaway may get some notice, but won’t do much to help fill Hollywood’s vacant retail space.
“It’s a gimmick, and I doubt it will work,” said Jonathan Kingsley, managing director and executive vice-president for Grubb and Ellis Florida.
Kingsley said attracting tenants who couldn’t normally afford to enter a leasing agreement is a recipe for disaster.
“The tenant has to have skin in the game,” he said. “When the free rent ends, they’re not going to be able to make the payments.”
While many landlords are getting aggressive by cutting rent to keep retail space full, Kingsley said he knows of no other long-term rent free arrangement in South Florida.
He said he advises landlords to stagger rental discounts over an extended period. That gives their retail tenants a major incentive to manage their business finances while keeping vacancies down.
Robbins said all those entering the free rent contest had to detail a complete business plan. She said All American Gator already runs a successfully processing plant in Hallandale Beach, where it processes alligator meat for sale to restaurants and tans alligator skins into leather goods for sale to retailers and wholesalers.
Brian Wood, president of All American Gator, said without the free rent it would have been difficult for the company to establish a retail presence for his business.
“This a way of getting our concept together and to see what works and what doesn’t,’’ he said.
Wood said he had previously run a retail shop in downtown Hollywood from 1999 to 2002. But he said business deteriorated after the events of Sept. 11, forcing the shop to close.
Lisa Liotta, deputy director of the city of Hollywood’s downtown Community Redevelopment Agency, said several of the rejected applicants in the free rent giveaway have already inquired about other retail space downtown.
“The contest was definitely a positive for the downtown area,’’ she said.
She said despite the economy, a number of new businesses are opening in the next few months in downtown Hollywood including a fencing academy and an ice cream parlor.