Without a doubt, one of the most important components of any supermarket business is the real estate upon which it operates.

Lease rates per square foot, tenant mix, renewal options, percentage rent, parking lot accommodations and lighting, exclusivity clauses, expansion opportunities, and more—all are of great concern to grocers, and terms regarding these factors must be satisfactorily negotiated with landlords.

In today’s economy, however, it’s no secret that many landlords are struggling with financing and a generally slow market, not to mention both regional and national retailers “going dark,” or consolidating operations at nonperforming locations.

While that’s bad news for commercial property owners, it’s good news for storeowners in business for the long haul, because the opportunity to negotiate or renegotiate leases has perhaps never been greater.

At this year’s International Council of Shopping Centers (ICSC) trade event, I heard property owners and leasing agents air their challenges, and share how they’re stepping up to the plate to re-enlist existing tenants.



One developer from the Midwest, for example, didn’t hesitate to renew a 900-square-foot lease with a nationally known home electronics retailer for his 100,000-square-foot community strip center, a year before the lease expired. According to the developer, securing the additional five-year deal meant agreeing to 50-cent-per-square-foot rent reduction in, and a cap on, the amount the retailer would pay for common-area maintenance, insurance, and real estate taxes. What’s more, a marketing fund fee that was incorporated into the initial lease to assist the landlord in promoting the shopping center was dropped from the renewal.

Negotiate a better deal

This landlord obviously gets it. But others at the ICSC event obviously don’t, and still think they can solve their cash flow/rent roll problems by passing the burden. “At the end of the day, we’ll just have to pass on all these extra charges in the form of higher rents to our tenants,” said one.

Experts at the conference predict that the real estate market will rebound during the next 18 months, thanks to its inherent strength and resilience. Still, they say retailers should now survey their current leases for clauses or articles that might be renegotiated to boost their own bottom lines.

Retailers I spoke with at the show recommend these “negotiables”:

Seek a rent reduction per square foot for an early renewal.
Limit or cap the amount to reimburse the landlord for common-area maintenance, property insurance, and real estate taxes.
Request copies of invoices paid by the landlord for the above expenses, so that all costs are justified by the landlord.
Make sure any administrative charges tacked onto annual common-area maintenance reimbursements are reasonable and being assessed according to the lease terms.
Confirm that all tenants in the center are required to contribute marketing funds to promote the shopping center as a whole.
Offer no personal guarantee on the lease that would allow the landlord to place a lien against your personal possessions, i.e., home, bank accounts, etc.
Negotiate a “go dark” clause if none exists—if the business isn’t successful, this allows the storeowner to shut down operations and pay only rent and related business expenses until the lease ends.
Confirm that the landlord is current with all real estate taxes. Are there any liens against the shopping center that could interrupt a tenant’s operations?
Evaluate whether the HVAC system at your location needs to be repaired or replaced, and negotiate that.
Request the right to be informed of the status of other leases in the strip center, such as how much time is left on the leases and whether the tenants intend to renew, as this is valuable intelligence for when you are renegotiating.
Seek an exclusivity clause to limit the amount or linear footage of food items that another retailer operating in the same center may sell.