Retailers asking landlords to share their pain

As consumer spending tanks and retailers lick their wounds from one of the worst holiday shopping periods in decades, they're now asking landlords to share in their pain by lowering rent and other concessions. So how can retailers be so bold? Because they know that the combination of rising vacancies and debt coming up for renewal during times of tight credit give them the upper hand. From a Wall Street Journal story:

Retailers, having just struggled through one of the worst holiday shopping seasons in recent memory, are now trying to share the pain with their landlords.

Many stores are pushing to negotiate lower rents, warning that they mightn't be able to make it unless their costs are cut. Those in stronger positions are finding that the market's turmoil has provided them clout to haggle for lower lease rates...

The rush for concessions threatens to sap U.S. mall and shopping center owners' cash flow at a time when many are struggling to refinance debt coming due and cope with mounting store closures. General Growth Properties Inc., for example, the country's second-largest mall owner, has warned that it will have to seek bankruptcy protection if it can't renegotiate new debt terms with banks. While General Growth's problems are primarily due to its huge debt load, pressure on vacancy and rents are adding to its woes...

Landlords struggling with empty space from retail bankruptcies and contractions are particularly vulnerable to demands from their remaining tenants. A high vacancy rate or the loss of one or two anchor stores can doom a mall, because shoppers and new tenants go elsewhere, experts say...

Vacancy rates for malls and shopping centers in the 76 largest U.S. markets rose to 8.3% in the fourth quarter from 7.8% in the third, according to a survey set to be released Wednesday by market-research firm Reis Inc. That is the largest increase since 1999. Effective rents, which take into account landlord concessions like interior construction, fell for neighborhood shopping centers in 65 of the 76 markets Reis follows...

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