Give us a break in rents, Starbucks asks landlo
Jun 04 2009
Retail Wrap >>

Starbucks is pushing some U.S. landlords for as much as a 25 percent reduction in lease rates, taking advantage of a declining real-estate market to save on rent.

New York-based Prudential Douglas Elliman's retail leasing, marketing and sales division, is generally advising about a dozen landlords to work with the Seattle-based coffee-shop operator after they received letters seeking rent reductions of 20 to 25 percent.

"In this environment, what we've seen, in general, is the landlords and the retailers really have to work together more closely to prevail," said a representative from the leasing company. "We're talking a lot about tenant retention."

Starbucks began rent-reduction efforts in January as part of a plan to trim overall expenses, according to Starbucks spokeswoman Tara Darrow.

The same month, the company said it would close about 300 cafes in 2009 and cut as many as 6,700 jobs after first-quarter profit plunged 69 percent, hurt by an economy in which cost-conscious consumers cut back on premium coffee.

Darrow wouldn't confirm the size of the reduction the company is asking. She also wouldn't specify how many leases the company is trying to renegotiate or how many landlords have agreed to reductions. Starbucks isn't asking for a blanket rate reduction from the landlords it has approached, she said.

"We're taking advantage of the opportunity in as many cases as we can," Darrow said. "We feel like it's a positive program for us. Most of the landlords we've worked with have felt it is a mutually beneficial situation."

The rent-reduction program covers the U.S. stores operated by Starbucks, a number that totaled 7,035 as of March 29.

The effort doesn't include the more than 4,400 U.S. stores in airports, supermarkets and other licensed locations, Darrow said.

Property owners don't want a dark store, as it reduces the traffic. Rising vacancy rates and falling property values are spurring landlords to offer lower rents in exchange for longer lease terms. The relationship between operators and developers and owners has to be much more of a partnership than it used to be.

Adapted from source: http://seattletimes.nwsource.com; 30 May 2009