The pop-up trend shows that it remains powerful but can evolve


The 125% Lino pop-up in Beverly Hills and the Hoka One One pop-up in West Hollywood present new clothing and footwear lines.

The $ 50 billion pop-up industry is here to stay, experts agree, although some pop-ups may work a little differently in the future.

While the idea of ​​pop-up stores already existed, they gained popularity during the Great Recession.

“It really took off in Los Angeles in 2009 coming out of the financial crisis because we had so many retailers going bankrupt, we had so much retail space coming up,” said Chris Maling, director. at Avison Young Inc.

Pop-up stores are those that, as the name suggests, open for short periods of time, unlike stores with traditional long-term leases.

These stores can be open from a few hours to a few days to a few weeks to several months.
“It’s a temporarily leased space for small business owners who dream of opening a physical store, or these are online retailers looking to add a possible physical store as part of their omnichannel strategy to sell their products and services. but aren’t ready to commit to a long-term brick-and-mortar store, and they dip their toes in water to see if it’s a concept that will work, ”Maling said.

Kazuko Morgan, vice president of Cushman & Wakefield Inc., said she also sees pop-ups as a way for high-end brands to show something new.

“Some of them are collaborations, so it showcases the collaboration, which generates a ton of business and activity,” she said. “It’s really fun because it adds excitement to the streets, and you get more of it, you get new buyers, new customers. The pop-ups are great.

Perhaps the biggest change to pop-ups right now, however, is that some stores are signing longer leases.

“Pop-ups, usually pre-Covid, were situations where people would come in for two to three months or two to three weeks or six months and display merchandise in their store to give people an idea of ​​who they are. there, “said Houman Mahboubi, executive vice-president of Jones Lang LaSalle Inc.” After-Covid, which I now call post-Covid since things have calmed down a lot, the definition of pop-ups has really changed. People say, “We don’t know where things are going… so why not commit to a six month or one year lease but with the option of committing to a long term lease and making it a long term? normal lease People will go into a three-month, six-month, one-year, or even two-year contract, and then go into a five to ten year contract.

He said a handful of stores had started this way, signing up to a short-lived two-year lease to test the waters before signing a long-term lease.

Maling agreed, saying he was seeing longer pop-ups, but in many cases, he said, they start with a short engagement and renew.

Some experts say that using the term pop-up for longer leases is a marketing tactic, and experts agree that shorter leases have similar benefits to traditional and shorter pop-ups.

It’s a “win-win”

Pop-ups offer many benefits, especially for tenants.
“The main point of a pop-up is to reduce tenant risk, and because of what we’ve seen after the pandemic, many tenants are looking to reduce their risk and create a pop-up,” Annika Colombi said , vice-president of CBRE Group Inc.

She added that it was a great way for tenants to “test the market”.

“It’s a great idea and strategy because it’s low risk,” Maling said of the pop-ups. “It’s a very minimal commitment in terms of rent, duration and cost of infrastructure. Pop-ups can be made very inexpensively.

And a benefit for both tenant and landlord is the excitement of the pop-ups.
“Pop-ups create a buzz. Millennials and Gen Z love pop-ups for this reason, ”said Colombi. “They love to research new things and trends (following), and this is one way an owner can deliver that.”

Maling added that pop-ups are often able to use an owner’s marketing team and social media to create more buzz.

And for homeowners, pop-ups can drive foot traffic to their malls and fill online store space. If they have another tenant waiting for the space but not occupying it for a while, this is a great way to earn income while waiting, according to brokers.
“If you have space that is vacant or not rented or pending licensing, it’s much better than having a vacant storefront,” Morgan said.

And in some cases, the tenant ends up signing an emphyteutic lease.
“It’s a very good thing because it’s a win-win for owners and tenants,” said Mahboubi. “A landlord rents an empty space and a tenant financially tries out a concept with no long-term obligation. “

Running out of space

But pop-ups also have some drawbacks.
“What’s ironic is that these pop-ups are actually more expensive for homeowners, but given that it’s a more tenant-driven market right now, landlords are willing to do it… in the hope that the tenant will be successful, and he will become a long-term tenant, ”Colombi said.

However, not all owners are interested.
Jay Luchs, vice president of Newmark Group Inc., said pop-up deals can take as long as long-term deals, and he and the owners he works with usually only return them as a favor.

“They usually say, ‘My legal fees will be more than the rent,'” Luchs said. “The concept of a pop-up is great, but in the real estate world it (often) doesn’t make sense to a landlord.”

He added that the pop-up could also hurt long-term leases if something goes wrong.
The financial terms of the pop-ups can vary from rent paid by the hour or by the day to profit sharing agreements or a combination of base rent and profit sharing.

While brokers agree that brands want to keep making pop-ups, a lack of available retail space in prime locations can make things more difficult in the future.

“In the future, we’re going to see fewer pop-ups,” JLL’s Mahboubi said. “The economy is improving tremendously, and this has been one of the best rental years in the past decade.”

Luchs said that while things were slow last year – he only made one sale on a lease – things have picked up this year, and he has already made 50 sales and leases.
“All the best spaces are fairly rented. Usually a pop-up wants better space, ”Luchs said.

He added that fewer pop-ups occur when signing long-term deals because less space is available. Landlords also see the possibility of their spaces being leased on longer leases and fear they will not be able to sign a long-term lease if there is a hired pop-up on site, he said. .

And traders see the lack of space and commit to leases.
“They take and swallow up spaces like before, but now there’s even more frenzy because there’s less space in the best areas,” Luchs said.
According to experts, for some brands, pop-ups are a big part of the business plan and something they will continue to do.

“It’s now part of the programs of many retailers to create permanent stores and sprinkle with pop-up concepts,” Morgan said. “So I think we’re going to see a lot more and a lot more strategically. However, as the market recovers and strengthens, there will be fewer opportunities. ”

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