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Taking away concessions could be risky

By: Daily Blog//May 20, 2011//

Taking away concessions could be risky

Daily Blog//May 20, 2011//

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With pop-up shops, subleasing and rent concessions, Portland property owners found some nifty ways to fill up vacant spaces through the dark days of the recession.

But as some of those building owners are finding out now, as the economy is improving, it’s hard to go back to the days of boom-time real estate relationships.

Anna Griffin pointed to an example of this in her about executives at Les Schwab Tire Center kicking a tenant, Naomi’s Organic Farm Supply, out of an otherwise vacant building the Bend-based company owns in Sellwood.

Basically, the owners of Naomi’s have been renting the space since 2009, originally on an eight-month lease that has been extended several times. Les Schwab was leasing the space to Naomi’s in order to get some cash flow until it decided to build a tire center at the location. Then this past winter, with the economy improving, Les Schwab notified the company that it had until the end of May to move out, as Les Schwab would soon build a tire center in its place.

This, obviously, started a firestorm from neighbors who had grown accustomed to shopping at Naomi’s. The neighbors have started a petition in support of Naomi’s even though Les Schwab has every legal right to kick it out of the space.

I truly believe this is the first of many stories like this. And while I have been a big proponent of getting creative with leases over the past few years, I grow concerned as I see these messes start to untangle.

If can happen to Les Schwab – the most beloved Oregon-born company (seriously, name one with a better reputation) – imagine what could happen in other case. For example, what will happen when when a development or real estate firm doesn’t renew a lease for a local design collective in a pop-up shop program? It’s not going to be pretty, and you can bet your bottom dollar there are going to be petitions and there are going to be public meetings.

If there is a solution, other than taking way below-market value for a space in order to save face, I don’t know what it is. I just figured it’s worth noting as it will become much more prevalent in the coming months.



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