Retail – Jason Otter, Logic Commercial Real Estate

As states continue to reopen in phases following the COVID-19 pandemic, there is much uncertainty in the local Las Vegas marketplace as well as the overall US economy. Specifically in the retail sector of commercial real estate, it seems that most businesses that are reopening are implementing inconsistent procedures and observing constant changing guidelines in hopes of generating some sort of income but it’s still to be determined if that income generated will be enough to support expenses and allow retailers to stay in business.

Any retail business that was deemed non-essential during the government shut down and wasn’t allowed to operate is now actively looking to adjust their business model to hopefully remain open during any potential future shutdown. Examples of this would be soft goods retailers looking to expand into carrying food items in their stores in hopes of being deemed an essential business. Businesses that were allowed to operate during the shutdown are reviewing their business model to ensure they are able to operate in a more efficient and safe manner while attempting to maximize sales. Going forward, brands like Café Rio will continue to expand in Las Vegas but will modify their design to include a drive thru on future restaurant locations.

Landlords and Property Managers sure took on a burden during the shutdown. EVERY tenant was looking for and expecting some sort of concession from landlords even though the majority of landlords weren’t receiving concessions from their lenders. Some of the common requests our teams at Logic dealt with were requests for rent abatement, rent deferment or partial payment of rent and occupancy costs. Strategic landlords were proactive in working with tenants and commonly pushing towards awarding their tenants deferred rental payments and extending the term of the tenant’s lease. Some landlords were also successful in negating release of tenant exclusives or restricted uses in exchange for rental concessions to the tenant.

Most investors have been focused on actively sourcing capital and waiting to deploy funds in the marketplace if/when there is a decline in values. Other investors are using this time and low interest rates to upgrade the quality of assets they own and are aggressively chasing well located shopping centers with long term, credit worthy tenants. Single tenant NNN deals such as Starbucks, Chic-Fil-A, McDonalds and others are trading at historically low capitalization rates and sellers have multiple offers to choose from. NNN=Net, Net, Net.  In addition to rent, tenant pays pass through expenses to Landlord. An example would be tenants prorata share of real estate taxes, insurance and property management fees.

2020 is continuing to be a roller-coaster ride for us all, regardless of what sector of commercial real estate you focus on. When forecasting ahead, I recommend you keep your seatbelt on for this roller-coaster ride of a year isn’t over yet.


Jason Otter, Director
Logic Commercial Real Estate