Events and Pop-Ups Are a Boon to Troubled Retail Real Estate—and Vice Versa
The recession has brought a flurry of “For Lease” signs to the windows of Los Angeles retail spaces, which have been vacated with particular urgency in high-rent districts like Melrose Place, Robertson Boulevard, and Sunset Boulevard. But the bad news for real estate could be buoyed by corporate event and pop-up hosts using those same spaces—and likewise some hosts are finding that a vacant retail space can be an efficient and attractive venue choice.
“[The high retail vacancy is] definitely encouraging me, with any event, to walk around an area I like and look at all the retail spaces as a first protocol,” said Harrison & Shriftman national creative director Ryan Jordan, who recently chose vacant retail and parking structures for the likes of Allergan’s Latisse launch, and a launch for Russian designer Kira Plastinina (whose line filed for bankruptcy just months after its U.S. debut). “They’re a lot more cost effective, and it definitely increases your bargaining power, since they're already vacant—in New York, Miami, L.A.—everywhere.”
The Beverly Center, which occasionally hosts its own promotional events, is actively shopping for corporate event and pop-up hosts. “I've been talking to New Beauty magazine about doing a pop-up store [out of which the magazine would offer relevant] seminars, maybe for a month or a couple of months. We've been talking to Los Angeles magazine about doing the same thing for the tastemakers issue. Also we’ve been working with [an animal rescue] organization to do animal adoptions [out of the space formerly occupied by a] pet store, since their lease expired, which would allow us to lease the space later,” said Steve Valentine, a publicist for the mall (which may be facing a significant new PR problem after the murder of a young rapper in daylight there on Monday).
Vacant retail space can make for a good deal for short-term renters. Matt Stoelt, whose Stoelt Productions currently has a temporary gym for Reebok installed on La Brea, said, “[Landlords] have accepted our offers for like $0.30 on the dollar for what it would cost to rent it [over a longer term]. We've gone out and gotten incredible huge spaces [that would have otherwise been] way out of our budget range. As far as the Reebok space, how great is it for the landlord who currently has three brokers marketing his space, and still no renters, that we're going to stay and pay rent? Retail is on its knees, and the event industry is helping to offset the losses.”
A commercial property on a desirable street in West Hollywood might range from $2 to $4 per square foot for a five-year lease with options, said David Moskowitz, the head of commercial real estate for the Hollywood Hills area office of KW Commercial, a division of Keller Williams Realty. He also noted that a space on prime Melrose Place might fetch $8. Although Moskowitz has not been approached to negotiate a short-term event-related lease, he thinks the prospect is smart for both potential parties and said that with the vacancy rate so high, "People are making deals." A 7,500-square-foot space on Santa Monica Boulevard in West Hollywood that would typically go for $30,000 per month ($4 per square foot) for a traditional long-term lease might be had for little more than a third of that sum for a single month's rental, one event planner reported after research for the same purpose.
For Latisse’s complicated build-out, Harrison & Shriftman’s Jordan was able to negotiate a five-day rate in the vacant space for the same price as a three-day booking fee at a traditional venue for load-in, the event, and breakdown. “Brokers are extremely competitive, and [the longer time frame] made the event run much smoother,” said Jordan, who also enjoys the creativity and brand-building potential a blank-slate space affords. “You’re able to create something that's far more on brand, a lot more custom. And it's a space nobody knows as an event space.”
Other pop-ups—like Kitson's temporary outlet store on the Third Street Promenade—are making use of retail space to liquidate the merchandise from shops in other high-rent districts (or to liquidate merchandise altogether). The House of Campari will reprise its presence in L.A. with a pop-up launching late next week and running through June 14 that will take over the former Lord's space on Beverly Boulevard. And the phenomenon goes beyond Los Angeles, too: In Miami, Johnnie Walker Blue Label set up a temporary bottle-engraving lounge at one of the area's most expensive shopping centers, the Village of Merrick Park mall, for the holidays.
Of course, not every landlord is eager for the opportunity. “[Event rentals are] something we would not consider and we haven't,” said Francis Montgomery, president of Montgomery Management, which manages the high-rent Sunset Plaza complex in West Hollywood. “We consider Sunset Plaza a cut above that sort of marketing. We have about three or four out of 45 vacant, but I think it's always good to have an empty space so you have a lot of people coming to talk to you.”
A walk down Sunset Boulevard in recent weeks would seem to suggest a more significant vacancy rate, and Y-3 has set up a pop-up just to the east at 8570 Sunset, in a complex known as the Sunset. “Some [owners] do keep their game face on—they always [claim to] have a deal pending,” said Stoelt.
“It is something that we would be open to, but we currently have no vacancies that would be big enough to accommodate an event situation,” said Maureen Pollack, the director of marketing for Beverly Hills’ chichi Two Rodeo shopping street—apparently a fortunate exception to the trend.
Event producers may provide more than a short-term cash infusion for owners of vacant buildings. Some also provide capital improvements through their event builds. “We did a lot of tenant improvement to [the landlord’s space] for [the Reebok] event,” said Stoelt, who had previously worked in the same space—which has remained vacant—for a M.A.C. event during a Paper magazine event series. “We leveled an unlevel floor with 4,000 square feet of brand-new laminate floor that's going to be left behind. We also carpeted and did work on the second floor, put in track lighting, and carpeted the stairs. The landlord was open to cost sharing as well. It’s a win-win, a huge win for everybody. We took a space that was not ready to walk in and rent—and we made it that.”
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