second street

2nd Street can be expensive for not just consumers but also retailers that pay expensive leases. The ABJ is reporting that Austin Java and RunTex are working with the City of Austin to restructure their leases in order to help weather the economic storm.

From the article:

“The city said discussions with Second Street District leasing agents suggest that other retailers are also feeling the pinch of declining sales. According to the city, landlords are having to renegotiate leases and make temporary rent adjustments to help shops avoid closing down.”

Landlords, including the City of Austin, must be willing to renegotiate with retailers to avoid increasing vacancies becoming endemic to 2nd Street District. City council will discuss the issue this Thursday.

The ABJ poses the question. The real question is: why is retail turnover so high on Second Street?. The answer is quite simple and academic.

Income < Expenses

There you go. The worst economy in a century does not generate enough income for a boutique clothing or furniture store to thrive. Combine that with already expensive leases (in the ballpark of $32/ft NNN) and Second Street finds itself in a perfect storm for tenant default. Eventually, empty store fronts will have a snow ball effect on adjacent retailers. Landlords are loathe to lower their lease rates, but perception is often reality, and the perception of Second Street is “luxury” goods. Many marketers will tell you that “luxury” is no longer a good adjective to promote your wares.

Now, as I’ve written before, the tenant mix on Second Street, and in downtown Austin in general, is out of balance. The next wave of successful retail in Downtown Austin will be for stores offering goods and services that people can afford and need to purchase on a regular basis.

Address the tenant mix problem and Second Street will be an unquestionable success.

Austin Java and RunTex Working To Reduce Rent At City Hall

Is Second Street a Success?