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Starbucks brews up rent reduction

Amy Scott May 29, 2009
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Starbucks brews up rent reduction

Amy Scott May 29, 2009
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KAI RYSSDAL: One of the bright spots you keep hearing about the economy is that there’s a little more wiggle room when it comes to what you pay for stuff. Everything is on sale. For Starbucks that apparently includes the rent. The coffee chain is asking landlords for a break as Marketplace’s Amy Scott reports.


AMY SCOTT: I met real estate economist Sam Chandan at a Starbucks in Soho. Starbucks hasn’t been selling enough of those fruity drinks. The coffee chain has closed hundreds of stores, and plans to close more.

SAM Chandan: What this creates is a situation where they have a very credible threat in approaching landlords and saying that for this particular location to be profitable, we need some concession on the rents that we’re paying.

Starbucks didn’t reply to messages today. But Bloomberg News reports the company has been pushing landlords to cut its rents by as much as 25 percent. Chandan says in a recession, landlords have good reason to play along.

Chandan: Even in a very busy location like this one in Soho, it would be pretty tough to find a new tenant in this market.

Like many homeowners, commercial landlords took out huge mortgages during the boom. They count on rents to keep making those payments. An empty storefront can turn other tenants off and drive down a building’s value.

Michael Jackowitz is a real estate lawyer. He saw so much potential for negotiating, he started a business. He says he’s helped a national restaurant chain, a mom and pop retailer, and a theater company lower their rents.

MICHAEL JACKOWITZ: Rent is for the most part people’s first or second largest expense and they need help addressing it.

For those of you wondering, Jackowitz says by all means try this at home. Residential renters may not have as much clout. But many landlords may be happy to keep their units occupied, even for a smaller check.

In New York, I’m Amy Scott for Marketplace.

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