Base Rent Increases in struggling shopping center.
My family business is getting a Base Rent increase over 10% with our renewal due to being "way below market" The shopping center they are in is struggling and a big tenant recently left. 

What are their options?
[{"id": "itrnrev", "text": "Move", "replies": [], "depth": 1}, {"id": "itrtu0l", "text": "Dying retail centers are not where you want to locate your business anyway.  If you do renew, get a termination right if your revenue falls below xxx,xxx (low threshold) OR if the remaining anchors go dark.  \n\nYou can also try to find comps or market data to see if their claim is true.  Always good to arm yourself with data.   However, 10% bump isn't too bad.  Inflation is like 8.2% so thats only really 1.8% higher if your base rent was set last year.", "replies": [{"id": "itrz7q4", "text": "Thank you!", "replies": [{"id": "ittdkvr", "text": "Don't renew. 10% increase is above the rate of inflation. The worst part the prior post left out is that you will likely see a large drop off in traffic as a result of losing that large tenant that was also attracting tenants to your store. The rent increase would only be justified if that large tenant also stayed.\n\nIt would make sense to move somewhere busier and pay more rent and get more business than get stuck at a dying bankrupt building. You should be paying a big discount to market to be enticed to stay at a dying retail center!\n\nLosing a large tenant is often the sign the retail center will go downhill fast. The current owner is probably in default or close to default on their mortgage assuming this large tenant makes up 30%+ of the retail center. When the property goes into bankruptcy, the bank does the bare minimum of maintaining the property while trying to sell it to a new investor. This means other tenants may leave and there will be no new large tenant for years while the bank forecloses on the property, sells it to a new investor, then the new investor looks for a new tenant and takes an additional 3-6 months to build out the space for the new tenant (Temp holloween stores don't count)!", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "itrzqt8", "text": "I would compare my rent-to-turnoverr ratio to the market (/field) average.\n\nThis is probably the best tool to understand if the increase is justified and also if is this the right location to be in.\n\nAlso usually big anchors have very strict clauses about occupancy - if this happena to be below surten level - it will cut the rent or go over to turnover rent only.", "replies": [{"id": "its37x7", "text": "Thank you!!", "replies": [{"id": "itteshh", "text": "You probably haven't had enough time and data to evaluate the impact of the big tenant leaving. You should expect some drop off from from your current business level even if it was competition. \n\nI worked at a restaurant that was the \"spillover\" for a more appealing restaurant. People came to my restaurant for the shorter wait.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "itszylt", "text": "Check out loopnet for other available listings to determine market rent. Ask for tenant improvement package to reinvest back into the space.", "replies": [], "depth": 1}, {"id": "ittfz1j", "text": "Tell them to shove it, and counter with a more reasonable figure.", "replies": [], "depth": 1}, {"id": "ituff9u", "text": "Hiw big is your shopping center? If it is large and you are dependent on traffic from the anchor, now is the best time to negotiate.\n\nYou should follow these steps\n- get a broker or find another retail site. Something better and get an order of magnitude of terms. Even if you dont want to move, chances are you can get some TIs and obviously the qnchor store situation should be better.\n- gather data on the impact of big boxes closing and your margins. \n- if there is any language about cotenancy in your lease, read it and execute it.\n- organize a meeting with your landlord and express a desire to stay, but given the impact to your business from inflation and closures and the competing offer which is much better (even if it isnt), you are willing to stay at a much reduced rent.\n- haggle. Usually if you get great terms, it will be on a 2 year extension. Which buys you time to see what happens in the big box, and should help your margins.  If you negotiate a longer term lease, add a cotenancy clause that they need to have a 2 year lease on that space (not spirit halloween) otherwise your rent drops\n\nHonestly I cant see them letting you go in this environment. And we will be in a recession next year. They will have debt service problems, capex problems since they will need to pay any big box tenant, and if they had a better option theyd have booted you out.", "replies": [{"id": "itwm07t", "text": "Thank you! If you can... what is order of magnitude? And also, if there was an auto-renewal and they vacate, can the landlord seek the rest of the term through collections?", "replies": [{"id": "itz1e5k", "text": "Depends on the terms of an auto renewal and what state you are in. Really hard to say, but it is very rare to get more than a 1 or 2 year penalty/termination fee on a 10 year lease. \n\nAlso depends if there is a personal guarentee and what assets you have. A big landlord isnt wasting legal fees going after you cat.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "itunmlj", "text": "Commercial Property manager here 13 years experience. If you were a little below market rate before inflation, with inflation that might be the real number they need to achieve to keep the asset value at market for that class. \n\nMost landlords know that\u2019s tough pill to swallow and broke it down spread over x amount of time from what I\u2019ve seen. \n\nThe most important thing I have found (and full disclosure, I\u2019m a referral partner) is applying for the ERTC tax credit for small businesses, I recommend this to any tenant struggling to make rent or handle standard rent increases as well as FMV rent increases. \n\nThe Employee Retention Tax Credit is a refundable tax credit (AKA check, AKA bag of cash) for businesses who operated in 2020 and 2021 , even if they have already claimed PPP. \n\nThe biggest problem I\u2019ve seen in redeeming this employee tax credit is that most small businesses want to use they are small accountant to apply for it. And accountants just were not well-versed in the cares act which was over 1000 pages long in order to maximize the benefit for the small business. Nor are they experts in Interpreting bills and legislation nor should they be. \n\n That is why I\u2019m a referral partner with Stenson and Tammadon which have professionals and lobbyists who helped craft the bill and fully understand every dollar that is owed to small business owners who apply for this tax credit. Today I\u2019ve helped seven tenants apply for it\n\nUsed car dealer $600k\nBakery $254k\nPet Salon $79k\nBreakfast Lunch cafe $60k\nBar $120k\nHome Building Company $3M\nDealer Group (my commercial real estate portfolio is owned by a gentleman that owns new car dealerships as well) $4M\n\nIf you are a tenant or the landlord who wants to help their tenant get maximum benefit from the Cares Act in terms of Covid subsidies for small businesses Who are currently tight on cash flow I can help. Stenson and Tammadon takes a small percentage of what you are awarded overall but they also have found more money for each one of my clients then they\u2019re small time accountants were able to. \n\nNo business has to stop using their accountant this is an additional service with professionals above and beyond standard taxes and bookkeeping. \n\nYou can DM me here and I will share my email address and connect anybody who needs help applying for the money owed to them or their tenants (with them).", "replies": [{"id": "itvshf8", "text": "Bullshit sales post.", "replies": [{"id": "itxl7to", "text": "I have copies of the checks. But that\u2019s fine if that what you wanna think.", "replies": [{"id": "iu5v65d", "text": "I know - because you are selling a service.", "replies": [{"id": "iu6oho8", "text": "T", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ituntqm", "text": "Call a broker at a shop like CBRE, colliers..etc. you don\u2019t pay for their services. Their fee is paid be the owner of the building. Reach out to them and tell them and have them negotiate for you or find you a new space. Too many people try to do it themself then mess the paperwork up or think they\u2019re getting screwed with an increase come to find out every other place is doing more than what current owner is offering and in reality they are getting a good deal and should have stayed. Point is lot of variables - why not (for free) have someone rep you..", "replies": [], "depth": 1}, {"id": "ituqntg", "text": "Depending the area but say you\u2019ve been there awhile you probably are due for a rate increase if they don\u2019t have built in increases, I typically try to build in 5% per year built in the lease for this reason exactly people freak out about bigger increases even though it\u2019s actually cheaper for you that way but if they do smaller increases each year it doesn\u2019t seem as bad", "replies": [], "depth": 1}]