A trendy moniker may be the biggest distinction separating “pop-up” stores from traditional short-term leases.
Discussing pop-ups and short-term lease agreements these days is a little like delving into the age-old debate of “to-may-toe” versus “to-mah-toe.”
Pop-up stores have been generating quite a buzz in recent years, but what—if any—tangible differences exist between these “pop-ups” and stores with a traditional short-term lease or license agreement? “The trend that I see is to call any temporary freestanding or inline space a pop-up,” says Mark Klockner, president of Retail Infusion, a retail and marketing solutions firm based in Nashville, TN.
That is certainly creating some confusion in the industry. Adding to the problem is that there isn’t a clear definition of pop-ups. “You can talk to 50 people and get a bunch of different definitions,” says Andy Bailen, managing director of 3Pe Consulting LLC, a retail-consulting firm in Denville, NJ.
There are definite similarities between pop-ups and short-term tenants. Both want locations that are easy to get in—and out of—with low overhead. Both will take space as-is because neither wants to invest dollars renovating space in a temporary location.
One distinction between a pop-up and short-term tenant is that the term of a pop-up is clearly defined—often around a specific date. “In my mind, a pop-up is saying we are going to open up in a particular window of time and operate for x amount of weeks or days and then we are going to go away,” says Bailen. For example, a Halloween retailer may want a pop-up store to operate from September 1 through November 1, and then have another 10 days to clean out the space. In comparison, a short-term tenant may simply sign an agreement for a set period at any time, such as a three, six or nine-month term lease.
Location, location, location
Although each situation is unique, pop-ups tend to open and close in the same location. That is not always the case with short-term tenants. Short-term tenants often sign license agreements where the landlord retains the right to terminate or relocate the tenant. So, a short-term tenant may shift from location to location within a mall based on where space is available. Short-term tenants also may have more flexibility to renew and extend those agreements. Some “temporary” tenants have resided in a location for 10 years, Klockner notes.
The mindset of the temporary tenant can be to operate on an ongoing basis as long as they can get space, adds Bailen. One short-term tenant in New Jersey called Square One, that sells apparel, shoes and outerwear, is an example. “You can go into a mall such as Garden State Plaza and see them operating 365 days a year if the space is available,” says Bailen. “Or you can see them operate for six months, then disappear for two months, then reappear when another space becomes available.”
Temporary tenants may want to be in a particular shopping center or mall all the time, but they don’t want to pay permanent store rents, nor do they want to fund a permanent store build-out, says Bailen. Those temporary tenants will be very flexible to move around a shopping center as a landlord brings in more permanent tenants, he adds.
In contrast, a pop-up shop is set up in a single location or a very limited number of locations for a very short period of time from as little as 24 hours to several weeks.
One of the key purposes that extremely short-term pop-ups serve is brand promotion and marketing. “It is really intended to steer the public’s perception of a specific product or brand,” says Jennifer Adams, senior vice president and director of specialty leasing at Jones Lang LaSalle in Philadelphia.
For example, The Gap operated a pop-up store for only a few days in Times Square selling nothing but pantone colored T-shirts. Such pop-up stores are geared towards grabbing the customer and getting that excitement, and then sending those customers back to a Gap store once the pop-up has come and gone, adds Adams.
There is a growing segment of the pop-up market where stores are operated and managed by marketing groups, agrees Klockner. Maybelline, Bailey’s Irish Cream and Vogue are just a few examples of brands that have opened pop-up stores for different marketing or promotional events. “I think marketing groups are offering their clients something different,” Klockner says. “In many cases a new product is being showcased. There is a lot of hype prior to the event and pre-marketing is essential, and in most cases, eclipses the actual set-up cost and real estate.”
Basking in the limelight
Although some subtle nuances exist, pop-ups and short-term leases are essentially one and the same. The term “pop-up” is simply giving more cachet to a concept that has been around for years.
One reason that pop-ups continue to generate buzz is because of the abundance of vacant real estate. Another factor elevating the popularity is that pop-ups are gaining exposure among operators in other categories or industries, adds Bailen. “It is just kind of creating a wave of enthusiasm for others to try it,” he says.