The New Leasing Landscape

Store leases have tethered many a jeweler to their business long after they wished to retire or close up shop. The sad fact is that too many owners often don’t grasp the complexities of the real estate contracts that bind them to a location—even a failing one—for the remainder of their five-year contract term.

This doesn’t just mean retirements are put on hold and bottom lines suffer: Since many contracts today require personal guarantees, store owners can find themselves in dire circumstances if they break a lease, putting their own retirement wealth and assets at risk.

Even so many years after the real estate crisis, there are still aftershocks hitting the commercial sector, which means a location a jeweler thought was a perfect spot a decade ago might now be a liability. Stores in malls are heavily dependent on the health of their anchors, and department stores have been struggling in recent years, with many closing. Stores in local shopping centers and mixed-use developments can see their fortunes turn on a big employer moving out of the area, a new highway opening up and bypassing them, or myriad other potential challenges.

With landlords unwilling to negotiate a mutually amicable severance that frees store owners up from the remainder of their lease obligation, many independent jewelers find themselves in professional and financial limbo.

Outright selling a store can be an uphill endeavor because bank financing has not returned to its prerecession state, cutting off yet another potential option for jewelers.

Ideally, store owners would be able to negotiate favorable lease terms at the outset, but without the expertise of the proper professionals, many are unaware of the clauses that can be entered or concessions built into a contract. And for those who already have signed on the dotted line and face the specter of the fruits of their labor trickling away, running a going-out-of-business sale and exiting a lease on mutually agreeable terms is a proposition that requires the skills of professionals experienced in handling such delicate situations.

When a store lease comes up for renewal, it behooves owners to think hard about their five-year plan. Without a clear path for profitability, or the desire to run a retail establishment for the duration of that time, jewelers should think long and hard about whether a lease extension is the right choice for them.  

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