Co-tenancy clauses can cause headaches in resolving lifestyle centers
David Bodamer / Retail Traffic
Research firms that monitor distressed assets don’t monitor the number of lifestyle centers in the retail pipeline, but industry observers say they are out there. During the past decade, lifestyle centers spread rapidly. In 2001, lifestyle centers comprised just 0.8 percent of total U.S. retail GLA, with 192 properties, or approximately 49 million square feet, according to data compiled for ICSC by CoStar Realty Information.
Today, lifestyle centers make up 1.77 percent of the retail universe, with 455 centers totaling 127.8 million square feet. While the amount of total shopping center space in the U.S. grew 18 percent to 7.2 billion square feet during the past decade, the amount of lifestyle center space increased 160 percent.
Given the new market realities, however, roughly 40 percent of those centers might ultimately prove unviable and will have to be converted to another use, says Jeff Green, president of Jeff Green Partners, a Mill Valley, Calif.-based real estate consulting firm. And here size matters. Centers that contain less than 500,000 square feet of space may prove to be vulnerable.
“You look at the lifestyle center as a magnet. The smaller the center, the smaller the magnetic attraction, therefore it’s more vulnerable,” Green says. “If retailers are going to close stores, those are the centers where they are going to close stores first.”
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