A commercial tenant (retail center) who needs to expand and ask to relocate
Hi BP,
Last week, one of our best tenants (a jewelry store) called and asked if we have a bigger space they could move to. They kind of mentioned about this in the past but nothing materialized (because we offered them a space that was bigger than they needed and they didn't really need to move yet). Now that their lease will be up for renewal soon (3/31/2024) and their business really needs to expand this gets very serious. They were the last tenant that previous landlord brought in and because of that their unit is the smallest (at 1000 SF only. However, rent is second highest). Our strip is 100% occupied now. However, the unit right next to this jewelry store is Cricket will have lease expire 1/31/2024 so about the same time. And Cricket was in opposite situation. When we leased to Cricket they actually wanted only 1000 SF but we only had a unit with 1300 SF available so they had to take that.
I looked and all our lease have relocation clause. So here is what I am thinking:
I can swap the jewelry store and Cricket.
Or if Cricket franchisee/operator cannot relocate (the owner said Cricket the franchisor is the pain in the neck when it comes to relocate even in the same retail strip because they make the operators purchase all new furnitures again and that's a $30K cost because it has to be purchased via 1 single company so it's expensive. They did it to him 1 time before so most likely it will happen again) then maybe I can take back some space from Cricket, like take 300 SF and add that to the jewelry store since they are next to each other. So that will leave Cricket with 1000 SF and pay rent only on 1000 SF therefore lower rent which is what they wanted from the beginning. Jewelry store doesn't have any issue with rent or rent increase so I am not worry about them paying. I just need to accommodate their need to expand and keep them as our tenant as long as possible.
Another option is not renew the lease with the Nail salon, then move the jewelry store there. The Nail salon tenant will also have lease expire on 3/31/2024. This is my least favorite tenant, always pays rent late (but does pay), rent is lower than other tenants (but higher than Cricket), doesn't want to pay the NNN portion that they underpay whenever we do CAM recon.
Any of you commercial landlords/property managers/attorneys dealt with this situation before? And what did you do? Did you pay for the relocation of the tenants and how much? What are some of the creative solutions you came up with?
Any input is greatly appreciated.