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Big Box Bust – A Demise to Tech Craze

The Plunge

The big box bust that’s storming through the nation doesn’t seem to be lightening up any time soon. Unprecedented  retail mega-stores now shutting down at an incomprehensible pace due to evolving consumer trends via internet purchases and accommodating delivery services.  Kmart, Toys ‘R Us, Sears, Carson Pirie Scott, Abercrombie & Fitch, Barnes & Noble, J. Crew (U.S.), GNC, even Subways are shutting the doors in large batches across the country [1]. The iconic brands dissolving across the nation not only pulls at the nostalgic heart strings of many, but sheds light on the shifting ideals of what it is to be a retailer in conjunction with progressive consumer habits or preferences. With the shopping demand surging through the internet, this has left many retailers to discover a massive decrease in sales over the past decade. Some retailers, such as Rue 21, a tween clothing store, even filing for chapter 11 before even experiencing significant financial trouble as a proactive measure that is likely an inevitable hardship tumbling their way.

Tech giant, Amazon, the world’s largest online retailer, has forever changed the way modern shopping behavior is executed. Everything from groceries, digital books, electronics, clothes, school supplies, pet food, and more can be purchased and usually delivered between a few days and even hours, depending on the type of account a user has. The unfathomable convenience bit makes shopping on Amazon extremely attractive in that one can shop for anything, at any time, and have it delivered directly to their desired location. Inevitably, as Amazon popularity skyrockets, big box retailers suffer drastically, causing a wave in the economy and the way in which commercial real estate evaluates retail sectors [2].

With vacancy rates increasing in large shopping malls, the challenge of finding occupiers for big box spaces becomes evident. Throughout the U.S., stores previously occupied by, now-bankrupt,  retailers are being converted into shared office space or restaurants.  More than ever, mall owners are welcoming unconventional tenants to obtain some of the estimated 200 million square feet of retail space that has closed, or expected to do so since early 2017 [3].

“Landlords need to be creative, strategic and quick with their large-sized vacancies — the Silicon Valley has become a hotbed for small- to mid-sized retailers coming from all parts of the country to take advantage of our increased population density and disposable income. These large vacancies can be flipped into very lucrative, higher dollar-per-square-foot units with the right strategy in place.” explains Senior Vice President, CSR Commercial Real Estate Services, Jonathan Hanhan.

Getting Creative

As countless big box stores remain vacant, the leaders in commercial real estate are challenged to think outside of the box (pun intended). Ginormous buildings with a naturally open layout, such as Macy’s department store, have been converted into movie theaters, music entertainment venues, and even sporting arenas [4]. This new wave of occupancy bingo creates massive opportunity to get creative and move fast. In conjunction with the e-commerce craze, more of these spaces are being converted into warehousing units. In other areas, restaurants, fitness centers, and office space is taking over. Iconic Silicon Valley’s tech bubble creating crisis for local retailers with the rest of the nation not far behind.

Big Box Bust - Numbers don't lie

Are you a business owner looking to buy, sell, or lease commercial property? Contact our experts today.

The information furnished has been obtained from sources we deem reliable and is submitted subject to errors, omissions, and changes. Although CSR Commercial Real Estate has no reason to doubt its accuracy, we do not guarantee it. All information should be verified by the recipient prior to lease, purchase, exchange, or execution of legal documents. 2018 CSR Commercial Real Estate Services. All rights reserved.
Sources:
[1] https://www.kiplinger.com/slideshow/investing/T052-S001-12-retailers-that-may-soon-disappear-forever/index.html
[2] https://www.investopedia.com/news/5-companies-amazon-killing/
[3] https://www.cnbc.com/2018/08/08/coworking-spaces-are-one-way-mall-owners-are-filling-empty-stores.html
[4] CoStar

3 Notable Sales in Q2

Industry professionals, Tony Odom & Jonathan Hanhan, successfully closed deal after deal in CSR’s Commercial Real Estate division in the 2nd quarter. With a typical deal taking anywhere from 6 months to multiple years to sell, or lease, these featured time-efficient, model transactions set the bar for local competitors in the Bay Area.

425 E. Santa Clara St, located in downtown San Jose, posed as the ideal opportunity in ever-growing Silicon Valley for highly-desired office space. An increase in the implementation of collaborative office spaces in famously tech-savvy Silicon Valley has become evident in the past decade. With 9,848 SF of stand-alone office space, secured onsite parking space, and additional revenue potential created endless possibilities for eager buyers.

2730 Bayview Dr, Fremont, CA symbolizes massive breakthrough in the marketplace as CSR Commercial Real Estate strategically earned the business of Fremont with virtually no inventory in the immediate area. Not only did the 2,501 SF industrial condo complex sell in just four days, but also closed in 16 days and sold at an unprecedented price of $350 per SF.

135 El Camino Real, located in coveted  technology hub, Menlo Park, CA, sold in record timing. It’s high-traffic location, walking distance from Downtown Palo Alto, created a realization of its true rarity in having the opportunity to own in the surrounding area. The 1,450 SF building is situated in a mixed-use zone, just minutes from infamous Stanford University.

Are you a business owner looking to buy, sell, or lease commercial property? Contact our experts today.

The information furnished has been obtained from sources we deem reliable and is submitted subject to errors, omissions, and changes. Although CSR Commercial Real Estate has no reason to doubt its accuracy, we do not guarantee it. All information should be verified by the recipient prior to lease, purchase, exchange, or execution of legal documents. 2018 CSR Commercial Real Estate Services. All rights reserved.

Helpful Hints to Successfully Renew Your Lease

It is up to the Tenant to notify the Landlord of his/her intention to exercise the “Option to Renew”  during the lease specified notification window. Tenants need to be vigil about lease termination dates and option exercise timelines, not only to keep their renewal options in-tact, but to have better leverage when negotiating a renewal. Furthermore, if the Tenant does not notify the Landlord, the Landlord is not obligated to allow the Tenant to renew.

Avoid Costly Mistakes

One crucial mistake that a Tenant often makes, is to assume he/she can simply go to a month-to-month term until they find another location. Most leases will have a “Holdover” clause. These clauses in the lease agreement often allow the Landlord to charge a premium of sometimes as high as 200% of the last month’s rent.

How your Commercial Broker can help you

Keep in mind, it is always best to contact your commercial real estate professional at least a year prior to the expiration of your lease term to assist with these matters.  Commercial real estate professionals can:

  • Listen to your needs and provide specific options. Is it best to move or stay?
  • Explain current market conditions and how they affect your potential move
  • Provide a Lease vs. Buy analysis to see if it makes more sense to buy rather than lease
  • Perform a comparable analysis to assist in re-negotiating with the current Landlord
  • Find a new location and negotiate terms
  • Provide a timeline for tenant improvements and assist in coordinating move
Broken Record Price per Sq.Ft.

Broken Record Price per sq.ft.

CSR Commercial broker the record price per square foot on North San Jose warehouse early 2017.
Steve Malech, Senior VP of CSR Commercial Real Estate, represented his client on sale of north San Jose warehouse for highest price per square foot.

 

 

Landlord’s Responsibility on Previous Tenant’s Personal Property Left Behind.

How to handle when personal property remains on the premises after a tenancy has terminated and the premises have been vacated by the tenant.

There are specific procedures and laws in place that a landlord must follow. Failure to follow the processes and procedures outlined in this article leaves the landlord vulnerable to a lawsuit by the tenant for the possessions that were left on the premises.

  • According to California Civil Code1980-1991, the landlord is required to give the previous tenant a written “Notice of Right to Reclaim Abandoned Property”.
    • This notice needs to notify the tenant that a reasonable costs of storage may be charged before the property is returned.
    • Where the property may be claimed and the date before which the claim must be made.
    • The date specified has to be not less than 15 days after the notice is personally delivered emailed, or mailed by  first-class mail and not less than 18 days after the notice is deposited in the mail.
    • The notice shall also contain ONE of the following statements:
      (1) “If you fail to reclaim the property, it will be sold at a public sale after notice of the sale has been given by publication. You have the right to bid on the property at this sale. After the property is sold and the cost of storage, advertising, and sale is deducted, the remaining money will be paid over to the county. You may claim the remaining money at any time within one year after the county receives the money.”
      (2) “Because this property is believed to be worth less than $700, it may be kept, sold, or destroyed without further notice if you fail to reclaim it within the time indicated above.”
  • If the previous tenant pays the reasonable cost of storage and takes possession of the property not later than the date specified in the notice then the landlord, at his option, can release the property.
  • If the personal property is not released and the notice stated that the items would be sold at a public sale, the landlord will release the personal property to the former tenant if he or she claims it prior to the time it is sold and pays the reasonable cost of storage, advertising, and sale incurred prior to the time the property is withdrawn from sale.
  • Please note, if the property remained in the dwelling and the former tenant reclaims the property within two days of vacating then the landlord has to release the personal property and can not require the former tenant to pay the cost of storage.

Disclaimer: This is a summary of the California Civil Code1980-1991. Please consult the code in full prior to taking any steps to remove personal possessions left by a former tenant. The full code can be found at, CIVIL CODE SECTION 1980-1991