5Qs for Excess Space’s Michael Wiener on real estate portfolio optimization
Thirty-three years ago, Michael Wiener founded Excess Space, a portfolio optimization firm that has helped hundreds of retail brands dispose of their excess real estate as well as restructure their leases. We spoke with Michael about the challenges facing retailers in search of finding (or keeping) the best locations.
How is the lack of new retail development reshaping today’s market?
Due to increased construction costs and high interest rates, we are seeing far less new development. As a result, the expertise required for disposition and lease restructuring has never been more important. Retailers are feeling the pressure of rising rents and are increasingly turning to third-party providers to help keep expenses in check. On the disposition side--while conventional wisdom would suggest less disposition in a tight market--we are seeing the opposite. Retailers are leveraging current demand to shed underperforming locations with lower termination fees or higher subleasing rental rates.
Landlords are also more willing to negotiate buyouts--particularly for sites in sought-after markets. For the first time in years, retailers have a much greater potential to right-size their portfolios.
What challenges and opportunities does a low vacancy rate create?
It has a positive impact on the releasing of our clients’ surplus spaces--particularly those that are what we would call “A” or “B” sites. Disposing of “C” sites--as well as those located in very small/rural markets--is never an easy proposition. It requires experience and knowledge, but also a significant amount of on-the-ground work.
It’s vital to include a local broker in any attempt to dispose of these properties and, quite often, the replacement user is a local or regional business. Finding these users requires hands-on involvement from a broker who understands those markets. Execution at the ground level remains critical. Often, these replacement tenants, lead to a terminated lease on behalf of our client.
How has lease restructuring evolved in this environment?
On the lease restructuring side, we are clearly in a landlord market. More than ever, it‘s critical as a third-party provider to cultivate strong landlord-tenant relationships, which means listening not only to the needs of our clients, but also to those of the landlords. Most bankruptcy-focused providers lack this structure. Years ago, our job was to push landlords hard. Today it’s different. Now it’s about creating balanced, win-win solutions through creative problem-solving, as that gets the best results in today’s market.
What else are you doing for retailers?
While working on lease renewals, we also assist retailers in choosing relocation sites. Sometimes a move makes more sense. We also offer another unique service, as we assist retailers in billboard renewals, as well as bringing new billboards to clients’ owned locations. This can drive significant revenue.
Chain Store Age just completed a webinar with two expanding retailers about their increased reliance on data in picking new locations. How are you using data?
We have become gatherers and editors of information and this will continue to play a large role in our business. But while change is a given, our future success remains tied to proven business practices and methodologies that have been cultivated and nurtured over the years. Balancing innovation with time-tested practices will remain our blueprint for success.
