If the concept of experiential retail is the industry standard for combating ecommerce and driving shopping center traffic, then pop-up shops are fast becoming the medium. They are a great way to harness trendy retail concepts and fill vacant retail spaces. Pop-up shops, however, can be tricky because they rely on micro leases of only a few months. New long-term pop-ups or “hybrid pop-ups” could be the perfect solution. A hybrid pop-up has a longer-term lease—yet still substantially shorter than a standard retail lease—allowing for some stability while giving landlords an opportunity to bring in trendy and experiential concepts.
“This really ties into the experiential retail trend. A traditional pop-up will typically be a lease term of a few months, and that can be beneficial for a landlord while they figure out the long-term strategy for the retail space,” Gabe Kadosh, VP at Colliers International, tells GlobeSt.com. “A hybrid pop-up has a longer-term lease, which allows the landlord to test the idea. I believe that we will see these kind of lease terms popping up across the country for experience restaurant concepts. It has happened on the apparel side, but this is really the first we have seen with a restaurant.”
Kadosh recently signed the restaurant concept Saved By the Max to a “hybrid pop-up” lease at the West Hollywood Gateway shopping center. The retailer signed a two-year lease at the center for its restaurant concept, a live version of The Max burger joint from the 1990s television show Saved By the Bell. The restaurant opens later this year, but has already gotten substantial press and attention on social media. “The ownership is ecstatic because it has gotten so much positive news coverage,” says Kadosh.
Deciding on a two-year lease term took some negotiating. The tenant originally requested a year lease, but Clarion Partners, the property landlord, wanted a longer term. “Everyone in the center has at least 10-year lease terms, and some are longer. I got them comfortable to go to two years by discussing the opportunity of being so close to the studios in Hollywood,” Kadosh explains. “They also have NBC Universal behind them as a partner, which is giving them props from the original show. I think that after realizing the opportunity and the reach, they felt comfortable with two years.”
Kadosh is hopeful that the tenant will renew for another lease term at the end of the two years, once the model proves successful. “It may not be the same concept, but they have talked about doing another themed restaurant. The idea is to grow and even to go to other markets with the concept,” he adds.
While this is the first big hybrid pop-up restaurant lease we have seen in L.A., the concept isn’t new. Other retailers or entertainment experiences have signed short-term lease deals for temporary or transient retailers. The Ice Cream Museum in Downtown Los Angeles is one example of a popular but impermanent entertainment concept. Kadosh believes that we are going to start seeing these lease structures more frequently. “Retail is changing more than ever right now. It is evolving so rapidly, and I think that the days of long-term lease are changing,” he says. “Having a shorter-term lease can be safer and allows landlords to keep up with trends. Generally, retail footprints are shrinking and retailers are downsizing. I think this gives more people an opportunity of getting a space with limited risk.”