Recently, an article appeared in the Houston Business Journal about the removal of the anchor store in many Houston malls. Kmart eliminated some stores, as well as three other large stores and some larger consumer electronics and furniture stores, now Albertson’s is gone. Who gets hurt? Franchise stores that pay a high price and rent to be in those centers with a large anchor tenant. Think about it, Albertson’s with its big super stores with Banks on the side, Starbucks coffee, bakery, mini eating area, film developing and pharmacy. Soon, in the western states, where property and land allow, cars are also washed on site and also some already have fuel for their car, when you are a member of the club card. What if you had an MBE, Quiznos, Subway, Dry Cleaner, Travel Agency (as if things weren’t bad enough anymore), GNC, Hobby Town, Cost Cutters, etc.?
If your anchor tenant moves out and traffic dies at the mall, you’re screwed. It’s tough right now for some small businesses that don’t have mobile services and no mobile services, but imagine the problems when the mall dies for no reason, due to an accounting failure or cost cuts by a larger corporation. , who is your anchor tenant. And don’t expect anyone to care, because Albertson’s is based in Boise ID and CA. Kmart is Midwest, and this is not like the Kreisge’s 5 and Dime in the old days, today it’s all about quarterly earnings, shareholders’ equity, the next few months P and L and they don’t give a damn about the burned area left behind . Other large retailers are based in the middle of nowhere, like Wal-Mart in Bentonville AR, and they often move to better locations on the outskirts of the city in a growing area and close the other stores. Are you sure you want to sign a ten-year lease for the space? I do not. Those could be the longest and hardest ten years of your life.
You may want to think about the risks before handing over ten years’ worth of lease payments to a mall management company. You may want to consider a reduction if the anchor tenant suddenly retires or an escape clause of your choice. Think about it, others didn’t and are still paying.
