Widespread Presence of Pop-Up Stores Raise Question for Landlords
With Halloween approaching and the holiday season not far behind it, pop-up shops touting specialized merchandise are sprouting all over the country. The question is whether they are a positive or a negative trend for retail landlords.
Smaller retailers, artists, and craftsmen are no strangers to pop-ups, kiosks, and carts to sell seasonal products, but an increasing number of large retailers are participating, causing some landlords and analysts to worry that the trend is another sign of a declining need for permanent retail space. Home-furnishing giant Crate and Barrel is a prime example, as the company announced it would operate pop-up stores for the first time in its nearly 50-year history.
Christina Norsig publishes the website PopUpInsider and authored the book “PopUp Retail: How You Can Master This Global Marketing Phenomenon.” She believes the number of pop-ups has exploded because both retailer and landlord stand to benefit as the landlord makes revenue from property that would otherwise be unproductive. In malls, installing pop-ups is akin to replacing a missing tooth—it supports the health of all the surrounding businesses.
The pop-up concept “has tremendous cost advantages for the retailer without the financial risk,” said Burt Flickinger III, a managing director with the Strategic Resource Group, a consulting firm that specializes in consumer goods and retail. Coupled with growth in Internet shopping, pop-ups are sparking a “retail revolution that’s making land-based retail less relevant every year.”
Retail tenants, especially large ones, often receive bargain rates for short-term rentals, which presents a potential downside to pop-ups for landlords, because it could prompt long-term tenants to ask for discounts as well. Flickinger estimates shopping centers in hard-hit retail markets like Las Vegas might offer discounts of as much as 40% on rents to bring in a brand name retailer on a short-term basis.
Short-term retailers have been around for decades. Malls bring them in to boost seasonal sales and add to the festive atmosphere, and retailers use pop-ups to their advantage by building a presence in expensive markets like Manhattan. As large retailers get in on the pop-up game, it will be interesting to see how landlords react.