Temporary Tenants

Temporary Tenants in real estate have been around since the beginning of time.  Just watch an episode of "Bizarre Foods" when Andrew Zimmern visits any east Asian or European country.  The concept is nothing new and has been practiced and successful for thousands of years.  Therefore, when I recently read an article about the impact of temporary tenants on real estate appraisals, I was shocked to learn how narrow-focused real estate professionals actually are on the overall subject.  Read the link below....

http://valustar.net/wordpress/2008/10/19/the-regional-mall-temporary-tenant/

Overall, a landlord that contracts with a temporary prospect believes in marketing and entrepreneurship.  Remember, at one time, EVERY store started as a temporary concept.  One objective of the temporary tenant industry is to diversify and upgrade the retail landscape.  While the article above seems to believe that the size of a tenant makes them credit-worthy.  I can ask 1,000 temporary tenants and retail entrepreneurs if they think the size of their store matters.  In most cases, the larger the space equals higher expenses.  Temp tenants just want to move product and grow sales.  They can operate from a cart at shopping centers or shallow store fronts.  In most cases, lease terms are more favorable for start-ups because of the inherent risk they are taking.  A new, unknown product / retailer must compete against the national clutter that exists in every shopping center.  

I will agree that most landlords that do lease to temp tenants, don't consider their tenants merchandising, marketing and / or promotional plans to drive traffic to the store.  If a temporary tenant is serious about their business, this will be a major consideration before going into business. 

Temporary tenants are necessary in retailing today.   They keep well established retailers focused on their customers and bring fresh and innovative products to market.  In most cases, a successful temporary tenant program can add millions to an appraisal.  Mr. Simpson, I applaud you for addressing the issue that temp tenants need to be focused on merchandising and marketing.  However, without them, the regional shopping center would be 100 times worse than it is today.