COVID-19 Continues to Put Tenant-Landlord Relationships Under Microscope, Say Kansas City Retail Webinar Panelists

Kansas City, Mo. — The COVID-19 pandemic has continued to highlight the importance of strong tenant-landlord relationships, particularly in the retail sector. Tyler Enders, co-owner of local Kansas City shop Made in KC, works with roughly 10 different landlords and has experienced a variety of different approaches to the COVID-19 conversation.

“Some local landlords have been very communicative and have come to us with a creative solution. Others have been responding late and are bogged down,” said Enders. “Ultimately, we’ll continue to look at vibrant centers, but we’re going to care way more about who owns it than we have in the past.”

Enders’ comments are indicative of the importance of relationships in today’s marketplace. Enders joined a panel of retail experts Wednesday, Sept. 16 for a webinar entitled “Greater Kansas City Retail Outlook” hosted by Heartland Real Estate Business and Shopping Center Business.

Fellow panelists included David Block, principal and president of Block & Co.; Erin Johnston, vice president of retail brokerage for Copaken Brooks Commercial Real Estate; Dan Lowe, managing partner for Legacy Development; and Andy Crimmins, founding partner of Crossroads Retail Group. David Waters, partner with Lathrop GPM, moderated the discussion.

Block said that his firm has been proactive with tenants and offered to defer multiple months of rent payments. Beyond tenant-landlord relationships, he emphasized the importance of developers and lenders working together in order to prevent foreclosures.

For Johnston, it’s important to look at each tenant on a case-by-case basis and figure out where the challenges lie. Copaken Brooks has offered deferments for existing tenants, but often adds lease terms to help offset those concessions.

“It is going to be tougher to do higher tenant improvement packages because now every deal is a little riskier,” said Johnston. “That’s a challenge I’m seeing come up.”

Enders agreed with this assessment and said his company will have to fund more of its own growth moving forward than it has in the past. “Since we’re a young company, we’re undercapitalized and have relied on strong landlord relationships and strong tenant improvement packages.”

Changes here to stay

Moving forward, Lowe said that retail owners need to do a better job of enhancing the tenant mix within properties rather than just giving away free rent. His argument is that tenants need to be around traffic generators, such as complementary tenants or features like outdoor activities. For example, Legacy added an outdoor entertainment area at Legends Outlets Kansas City. Events such as art contests or exercise classes are hosted at the space.

Panelists agreed that many of the changes that the pandemic brought on will be permanent rather than temporary. For starters, there is too much retail square footage per capita in the United States, argued Crimmins. There is roughly 23.5 square feet of retail space per person in the United States, compared with 16.8 square feet per person in Canada. “We need to continue to get that square footage down to an appropriate number,” he said.

Retailers moving forward will also have a stronger omnichannel presence and more creativity. Trends such as pop-up shops are here to stay, said Crimmins.

In new developments, retail will be a smaller component of an overall mixed-use design, said Johnston. In Kansas City, the up-and-coming mixed-use development Grand Place will feature 300,000 square feet of office space and a European-style market and grocery store. The project is a redevelopment of the former headquarters for The Kansas City Star newspaper.

Access the webinar replay here.

— Kristin Hiller

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