Building and opening stores is taking longer than ever due to permitting backlogs at many municipalities, but retailers can expedite store buildouts through some careful planning, writes Jon Graub, a Principal at A&G Real Estate Partners, in a Nov. 29 “Expert Viewpoints” column for Chain Store Age Online.
In “Four Tips to Cope with Today’s Permitting Nightmare,” Graub starts by advising chains to build in additional flexibility in their negotiations with landlords. “In today’s marketplace, you need to be more cautious about the schedule. If that store would have taken eight weeks to build in 2018 or 2019, it is now safer to expect a 12-week process.”
While retailers are powerless to eliminate backlogs at ports or permitting departments, some may be able to work with their internal and external teams to get plans drawn and submitted faster, Graub notes. “Options here include starting plans well before leases are executed and accelerating the internal approval process at the level of the real estate committee,” he writes. “Getting more efficient in this way can help retailers compensate for any construction or permitting delays that occur later.”
Ramping up communication with landlords is another imperative, according to Graub. “Now that the opening date is more likely to be a moving target, it is important for retailers to communicate with their landlords about any delays and obstacles that arise,” he explains. “If an inspector reschedules that visit for the third time in a row (or fails to show up at all), let the landlord know what has happened.”
Retailers could also consider informing their landlords of any new actions they are taking to stay on schedule. “Each time you touch base with the landlord in this way, it is an opportunity to shore up the relationship and possibly even receive unanticipated help,” he writes, noting that landlord could, for example, put in a call to a close contact at the local building department or provide contact information for a more reliable GC or subcontractor.
Graub adds that retailers could consider seeking protection in the lease with respect to buildout deadlines. In recent months, the veteran retail executive has taken a different approach to buildout deadlines in negotiations on behalf of major national retailers. “In today’s environment, it is safer to build a provision into the lease that starts the clock ticking on the buildout only after the permits are in hand.”
Lastly, Graub underscores the importance of understanding how shifts in consumer behavior and other disruptive trends may have changed the calculus for individual locations, the company and target markets. “Real estate has always been about ‘location, location, location,’ Graub concludes, “and this is every bit as true when it comes to planning for today’s onerous permitting backlogs.”
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Melville, N.Y.-based A&G has saved 650-plus clients $8 billion in occupancy and other costs and has sold real estate and leases worth $12 billion. Global M&A Network named A&G “Real Estate Restructuring Firm of the Year” for its work in both 2019 and 2020. For more information, visit https://www.agrep.com/
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