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August 11th, 2010Stores That Can’t Stay

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by Sarah E. Needleman

Next month, flu-shot provider WellCheck LLC will open its first retail stores—150 units in shopping malls in 35 states. Six weeks later, they’ll be gone.

The pop-up experiment “gives us the ability to test people’s appetite for receiving health-care services in a new venue,” says Jack Tawil, chief executive of the 12-employee New York concern. The one-year-old start-up plans to expand its head count to 450 for the duration of the trial and, depending on the outcome, turn the 20 most successful units into permanent locations with additional offerings.

Large fashion retailers and high-end designers have long demonstrated the success of the pop-up model for generating buzz about new brands and designers. But now, small businesses in a wide range of industries are testing new retail concepts and markets by leasing commercial space on a short-term basis, in some cases for just a few weeks. They say property owners are more receptive to the arrangements than in the past because the downturn has increased vacancy rates.

“It was all about big-box retailers and now it’s about niche players,” says Faith Hope Consolo, chairman of the retail leasing, marketing and sales division at Prudential Douglas Elliman Real Estate in New York. So far this year, the firm has negotiated short-term commercial leases for 30% of its roughly 150 small-business clients, up from 18% during the same period in 2009, she says.

Retail property prices in the first quarter were down 11.4% and 27.8%, respectively, from one and two years ago, according to Moody’s Investor Services Inc.

David A. Jacobs, director at Llenrock Group LLC, a commercial real-estate investment bank in Philadelphia, says commercial leases typically average five years. “There are more opportunities for small mom-and-pops to make short-term deals,” he says. “Landlords are desperate for any source of income so they can pay their mortgage.”

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