Landlords, tenants disagree on stability of commercial lease market
Local businessman Stephen Henderson said he was very encouraged by a recent forum bringing together commercial landlords and tenants to talk about the future.
"Its put my fears at ease," said Henderson who owns Great Games & Toys in Whistlers MarketPlace.
Tuesdays forum, organized by the Whistler Chamber of Commerce, featured nine panel speakers who talked about the landlord/tenant relationship. From the two-hour frank discussion Henderson said he thinks people understand that short-term gain is just going to hurt the resort in the long run.
"Whats very important is our long-term image... that people have a good experience here," he said.
The nine panelists ranged from a few local landlords, a tenant, a commercial real estate agent, property assessors and lawyers.
They met to kick start discussions between commercial landlords and tenants, dispel some of the myths and see where that relationship may be heading in the future, especially in light of the Olympic Games coming to town in 2010.
Though most agreed improving communication was key to the landlord/tenant relationship, the sides disagreed about the stability of the commercial lease market at the moment.
Jonathan Lazar, representing Larco Investments Ltd., a Vancouver-based company that owns Whistler Village Centre, which includes retailers from Cows to Surefoot, said that market is stable.
There isnt a large turnover of tenants at the Whistler Village Centre and 60 per cent of the current tenants are the same tenants that were in the building when it first opened in 1995.
On the flip side, from a tenants point of view, local business owner Dave Davenport doesnt see a stable lease market in Whistler at all.
A perfect example of the instability is the fact that theres "key money" in the marketplace right now he said. "Key money" is a payment to a landlord from a tenant or a prospective tenant in return for the chance to rent a building.
Davenport owns two businesses in Whistler, Mountain Crests and Skitch, and he deals with two landlords.
"There are people prepared to pay higher rents than I am," he said.
As such Davenport is feeling the pressure for rents to go up as well as the pressure to make more money in the marketplace.
That pressure in the marketplace is evident from landlord Don Wensleys recent experiences. He personally knows 14 businesses that went under in the last five months in Whistler. Some just couldnt make ends meet while others were sick and tired of working hard for very little return. The result of these unsuccessful businesses packing up and moving out is that other tenants simply move into their place and set up shop.
"I think the stability will come with the failures," said Wensley.
But its this failure of local businesses that may create pressure in the marketplace to bring more national companies into Whistler.
Tom Johnson, senior vice president of Trilogy, which owns MarketPlace, recognizes that the Whistler consumer, particularly the tourist, wants a national and a local experience when they come to the resort. The landlord has to create that retail mix he said.
Lazar agreed and said the Whistler Village Centre has a combination with tenants like Starbucks and Eddie Bauer along with locally owned and operated stores.
"Im not sure having nationals is a bad thing," said Lazar.
"(But) I think the local ma and pa stores are integral to the mix."
Increasing rents, however, may put more pressure on the local stores compared to the national stores, which can weather the bad seasons more comfortably.
Rents in the commercial lease sector have almost doubled for some tenants in the past five years. If a tenant was paying fair market value five years ago, they may be paying twice as much today.
This is a worrying trend for some tenants.
"If my rent doubles then Im going out of business," said Chris Quinlan, who owns Behind the Grind coffee shop and was part of the audience at the forum.
But thats just a function of supply and demand. Johnson said for every tenant he has there are five or six lined up to take his place in the MarketPlace.
Still the landlords on the panel agreed that if the customers want local stores and they dont get them in Whistler, ultimately they would not come back.
This scenario wouldnt be beneficial to anyone.
"It would be incumbent on the landlord to make sure the people come back," said Lazar.
One audience member asked if anyone was tracking the ratio of national to local stores in Whistler. Currently it is not monitored.
In addition to increasing rents tenants are also concerned about renewing their leases.
"One of the scariest things is not necessarily the rents were paying but the renewals," said Davenport, adding that during his years in business he got into the habit of always asking for a renewal when signing a lease.
He said there are very good landlords that dont give renewals in Whistler but he personally would not do business with them.
This has become a particular concern in light of Vancouver and Whistler winning the 2010 Olympic Games. Tenants do not want to be left out in the cold just before the Games.
Many are now asking for longer-term renewals, looking for 10-year leases instead of five years.
Landlords on the other hand may not want to give out longer leases because theyre concerned they may be traded in the marketplace.
"I would encourage everybody to take a good hard look at their landlord," said Davenport.
Even one of the landlords on the panel agreed.
"I think its very important from a tenants standpoint to recognize what their landlords motivation is," said Johnson.
The general consensus from the meeting is that the lines of communication need to be open and clear between landlords and tenants. In addition tenants need to be open with each other.
Commercial real estate agent Drew Meredith suggested tenants should be more open about the rents they pay so there is a clearer understanding of the fair market price.
"No one has a global view of the rents theyre charging in the town," he said.
Councillor Nick Davies, who chaired the meeting and also spoke about his experiences in the commercial realm as a lawyer, said the exchange of information is vital for a healthy relationship to continue in the future.