Instructor: Katy Jessee

Your name: Xinyi Huang

MFD 401

Date: 06/21/17

Company: YuanMaiLiangPin Ltd.

Abstract # 2

I. Reference to the Article

Bloomberg. "As Retail Outlook Dims, Mall Tenants Push for Shorter

Leases." The Business of Fashion. N.p., 09 June 2017. Web. 16 June 2017.

II. Statement of the Main Issue

Because more and more customers choose shopping online, thousand retail

stores closures. So the retailers pushing the estate agent change the lease

contract to short-term, like 1 to 2 year.

III. Methodology of the Author

To get the information of this article, the author Bloomberg interviewed

Andrew Graiser, head of A&G Realty Partners. Garrick Brown, vice president

of Americas retail research for commercial broker Cushman & Wakefield.

Perry Mandarino, senior managing director and head of corporate finance at

B.Riley & Co. Ken Frieze, chief executive of Gordon Brothers. SteveAgran,

managing director at Carl Marks & Co. Suzanne Mulvee, director of research

and senior real estate strategist at consultant CoStar Group Inc.

IV. Results and Conclusions

As the online shop development, more and more fashion brands started to

reduce the number of retail stores. They started think about how many stores

they really need. In this year, there are about 9000 to 10000 stores will be

closed and will increase to 13000 in next year. The length of lease is one of

the serious problem for department store. In next year, there are about 1150

shopping malls will be closed. Economic recession and online shopping rise

up, brands are willing to close store and pay more attention to online store.

Short-term lease will let brands choose open there store in B or C level

shopping center. The more empty space, the more diffcult to attract new brand

to lease. So the property developers try their best to let more brand enter, like

decrease rental, let retailer break the contract, get less clause of the lease. But

these behavior may bring more risk, because they let retailers open more

stores, it may cause more stores close in the future.

V. Implications of These Findings to Business/Marketing/Design Concepts

I think this is an interesting article because it reflect the real current situation

in the fashion industry. I also work in a retail store that located in a shopping

mall. Its easy to find more and more retailer close their store and less

customers shopping in the mall. In the article, the author descript the reason

why shopping mall developers and retailer want to change lease contract to

short-term. More bankruptcies and excess inventory are main reason and

developers have tried to use different ways to solute. But beyond all

expectations, it will also bring risks that let more retail store closed.
As Retail Outlook Dims, Mall
Tenants Push for Shorter Leases
After more than a dozen bankruptcies this year contributed to thousands of store closures,
retailers are pushing for lease renewals as short as a year or two.

NEW YORK, United States As if malls didnt have enough problems,

count one more: retailers looking to slash the duration of their leases.

After more than a dozen bankruptcies this year contributed to thousands of

store closures, visibility for the industry is so poor that retailers are pushing
for lease renewals as short as a year or two down from five to 10 years.

Youre certainly seeing the renewals geared toward the shorter term, rather
than the five-year renewal, said Andrew Graiser, head of A&G Realty
Partners. Retailers are now struggling to figure out how many stores they
actually need, he added, and landlords are looking at them with a much
closer eye than they did before.

Somewhere between 9,000 and 10,000 stores will close in the US this year,
said Garrick Brown, vice president of America's retail research for commercial
broker Cushman & Wakefield more than twice as many as the 4,000 last
year. He sees this figure rising to about 13,000 next year.

Everyones trying to figure out where the bottom of the markets going to be,
Brown said. He estimates it could occur in 2018 or early 2019.

And even companies that are relatively healthy are moving to prune back
hundreds of store locations, making it less obvious for property owners which
tenants they may lose. Deterioration can come fast: some retailers that were in
good shape a year ago are now on the edge today after vendor and financing
support dried up, Graiser said.

Further complicating the lease-length dilemma is the question of which

shopping centres will still be around in a decade. Cushman & Wakefields
Brown sees about 300 of 1,150 US malls shutting down in the next five years.

More Bankruptcies

Perry Mandarino, senior managing director and head of corporate finance at B.

Riley & Co., predicts that retail bankruptcies and restructurings will further
accelerate in 2018. Some of this will be the result of a long-overdue shakeout
of the surfeit of US store space, but the downturn is also compounded by
shifts to online shopping and consumers spending on experiences rather than
physical stuff, he said.
In this environment, retailers that would have automatically renewed
marginally profitable stores are increasingly willing to close them if they cant
make a deal, said Ken Frieze, chief executive of Gordon Brothers. His
companys services include overseeing store closures.

[Landlords] have their backs against the wall, so theyve been fighting back,
hard, he said. What you have is a game of chicken up to the end.

They do have some leverage. Roughly a third of US malls designated as A-level,

or premium, are doing just fine. The high demand for those spaces is being
used to drive occupancy in less desirable shopping centres via lease-
agreement conditions that bind tenants to also opening stores in B- and C-
level centres.

This long-time strategy is growing in popularity, according to turnaround

specialist Steven Agran, managing director at Carl Marks & Co.

Excess Inventory

With all this excess inventory, landlords are trying to do whatever they can to
keep malls occupied, Agran said. The more empty spaces, the more difficult
it is to attract new tenants.

Landlords are also eliminating co-tenancy clauses, which allow retailers to

break leases or reduce rents if a key mall tenant traditionally one of the
department stores shutters, Brown said.

But the move to tie premium leases to less-desirable spaces may have
unintended consequences, said Suzanne Mulvee, director of research and
senior real estate strategist at consultant CoStar Group Inc.

It may be working in reverse against mall owners, she said, since forcing
retailers to open more stores may just trigger more closures going forward. It
can backfire.