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Should you rent to a pop-up shop?

On Behalf of | Jul 13, 2018 | Real Estate Transactions |

Pop-up shops are now part of everyday business for a lot of brands. They’ve become a key method for emerging companies to generate buzz around a new product and gauge consumer interest. They’re also a great way for existing companies to handle the overflow of traffic that can happen every time a hot product hits the market.

Are pop-up shops really good for commercial landlords, however? Is it something worth looking into or should you run the other direction and keep looking for a long-term tenant for your space? What are the most important things to consider?

Here are the things you should know:

They help eliminate vacancies

Brick-and-mortar businesses are struggling in a lot of areas because of the surging popularity of e-commerce. That’s creating vacancies for a lot of commercial landlords.

Pop-ups can help you avoid long vacancies while you’re looking for that perfect tenant. Aside from providing an income, they keep foot traffic moving around your property, which ultimately makes it more attractive to prospective renters. Properties that look deserted or neglected can rapidly decline in value and interest.

You can avoid modifications

Since pop-ups are temporary, you can rent your property “as-is” and decline to allow any modifications that can’t be accomplished with temporary shelving and partitions. Most pop-ups can manage under those conditions, whether they’re hawking Halloween merchandise or creating mini-offices for tax preparation services.

Use clauses may be important

You need to include a “use clause” in any agreement with a pop-up. That allows you to restrict what kind of service or merchandise is being promoted on your property. If a product or service seems to be of questionable nature or offensive, you want to retain the right to put a stop to it. That protects your interests as a landlord.

Consider a “percentage rent” offer

If you need to make a more attractive offer to secure some pop-up tenants, consider offering rent on a “percentage” basis. Your tenant will pay according to his or her gross sales. The obvious drawback is that a tenant that does poorly isn’t going to pay very much — but some due diligence on your part could help you avoid tenants that aren’t good risks.

In short, pop-ups can benefit property owners as much as they do businesses. Just make sure that you work out the details of the lease carefully before you start.


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