Blog | Falcony

What is Specialty Leasing in Commercial Real Estate?

Written by Lauri Räty | Mar 26, 2024 6:00:00 AM

In the dynamic world of commercial real estate, property owners and retailers are constantly seeking innovative ways to maximize their spaces' profitability.

One such avenue gaining traction in recent years is specialty leasing. But what exactly is specialty leasing, and how does it differ from traditional leasing models? In this blog post, we delve into the intricacies of specialty leasing, exploring its benefits, challenges, and best practices.

Understanding Specialty Leasing

Specialty leasing refers to the practice of leasing commercial space for short-term or non-traditional uses. Unlike conventional leasing arrangements that typically involve long-term commitments, specialty leasing offers flexibility in terms of lease duration, allowing property owners to capitalize on seasonal trends, pop-up shops, or temporary events.

Types of Specialty Leasing Arrangements

  • Pop-Up Shops: Pop-up shops have become increasingly popular in recent years, offering retailers a low-risk opportunity to test new markets, products, or concepts. These temporary retail spaces can range from a few days to several months, providing flexibility for both tenants and property owners.

  • Cart, Kiosk, and RMU Leasing: Commonly found in malls and shopping centers, cart, kiosk, and RMU (retail merchandising unit) leasing involves leasing smaller, modular units for short-term or seasonal use. These spaces are ideal for specialty retailers, artisans, or entrepreneurs looking to showcase their products without committing to a long-term lease.

  • Event and Pop-Up Space Rental: Beyond retail, specialty leasing also encompasses renting space for events, exhibitions, or temporary installations. This could include hosting art galleries, food festivals, or corporate events, providing property owners with additional revenue streams outside of traditional leasing.

Benefits of Specialty Leasing

  • Maximized Revenue: Specialty leasing allows property owners to generate additional revenue from underutilized spaces, particularly during peak seasons or holidays.

  • Flexibility: For retailers, specialty leasing offers flexibility in testing new markets or products without the long-term commitment associated with traditional leases. Property owners also benefit from the ability to adapt to changing market trends and tenant preferences.

  • Enhanced Tenant Mix: By introducing a variety of temporary tenants, property owners can create a diverse and dynamic retail environment, attracting more foot traffic and enhancing the overall shopping experience.

  • Marketing Opportunities: Pop-up shops and temporary events can generate buzz and excitement, driving traffic to the property and increasing brand visibility for both tenants and property owners.

Challenges and Considerations

  • Legal and Regulatory Compliance: Property owners must ensure that specialty leasing arrangements comply with local zoning laws, building codes, and lease agreements. This may involve obtaining permits, insurance coverage, and approval from relevant authorities.

  • Tenant Turnover: While specialty leasing offers flexibility, frequent turnover can present challenges in terms of property management, maintenance, and tenant coordination.

  • Risk Management: Property owners should carefully vet potential tenants to minimize the risk of default or damage to the property. Clear lease agreements outlining responsibilities, liabilities, and termination clauses are essential to mitigating risk.

Best Practices for Specialty Leasing Success

  • Strategic Planning: Property owners should develop a comprehensive specialty leasing strategy aligned with their overall leasing objectives, target demographics, and market dynamics.

  • Tenant Selection: Selecting the right tenants is crucial to the success of specialty leasing initiatives. Consider factors such as brand alignment, product offering, and track record of the tenant.

  • Marketing and Promotion: Effective marketing and promotion are essential to driving traffic to specialty leasing spaces. Property owners can leverage digital marketing, social media, and partnerships with local influencers to create awareness and excitement around pop-up shops and events.

  • Tenant Support: Provide support and resources to tenants to ensure a seamless leasing experience. This may include assistance with marketing, logistics, and store setup.

Conclusion

Specialty leasing offers a unique opportunity for property owners and retailers to capitalize on temporary or non-traditional uses of commercial space. By embracing flexibility, creativity, and strategic planning, stakeholders can unlock new revenue streams, enhance the tenant mix, and create engaging experiences for customers. Whether it's a pop-up shop, cart kiosk, or event space, specialty leasing has the potential to transform commercial real estate landscapes and drive innovation in retail.

If your organisation is looking for a 360° tenant experience tool to involve all employees, service providers and tenants to improve the quality of your operations, have a look at the 30-day free trial of Falcony | Tenant Portal:

We are building the world's first operational involvement platform. Our mission is to make the process of finding, sharing, fixing and learning from issues and observations as easy as thinking about them and as rewarding as being remembered for them.‍

By doing this, we are making work more meaningful for all parties involved.

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