Mall tenants migrate to the street in search of lower costs

A shopkeeper at Shopping Center Norte, in the north of the city of São Paulo, was shocked to receive a bill this month with the collection of rent, condominium and promotion fund: R$ 115,000. Detail: his store has only 50 m². The rent of a commercial space of 100 m² in the vicinity, on the street, would cost R$ 12 thousand. This comparison between the cost of the mall and the cost of the street entered the shopkeepers’ accounts once and for all, and part of them has migrated to open spaces.

“The January ticket arrives with the collection of the 13th rent, on Christmas sales that simply didn’t happen or at least left a lot to be desired”, says Mauro Francis, president of Ablos – Brazilian Association of Satellite Stores, which represents stores of up to 200 m² installed in shopping malls.

Satellites are smaller stores than anchors, which are often the gimmicks of developments. The approximately 100 networks associated with Ablos added up to almost 6,000 points before the pandemic. Now there are 3,500.

If at a first moment of the pandemic, in 2020, with the malls closed, the administrators held the annual adjustment and gave discounts on the rent, now the reality has changed. The readjustment by the IGP-M is being transferred in its entirety, according to the maturity of each contract. “Depending on the base date, the readjustment accumulated in two years exceeds 45%”, says Francis.

As a result of an increasingly tough negotiation with the administrators, part of the owners of satellite stores have migrated from the shopping centers to the streets, often in the very vicinity of the old enterprise, to take advantage of the clientele. This is the case of the fashion retailer MOB, the Doctor Feet podiatry franchise and the Marília Marques party fashion chain. Accessories retailer Morana analyzes case by case, but is interested in increasing its mix with high street stores.

Owner of 36 stores in nine states of the country, MOB closed nine in malls during the pandemic and opened five high street stores. One of them is on Rua Indiana, in Brooklin, in the south zone of São Paulo, close to the Morumbi mall, where a unit was closed.

For Ângelo Campos, a partner at MOB, the last straw to leave the venture was the collection of two consecutive IGPM-s, which together added up to a 47% readjustment on the 2019 rent.

“The cost of occupancy in a street store is at least five times lower than that of the mall”, he says. The cost of occupancy of a mall includes rent, condominium and promotion fund. “This sum needs to be equivalent to a maximum of 15% of total sales. When it exceeds 20%, it becomes unfeasible”.

According to Campos, the issue of security as the high point of shopping malls is no longer a reality. “We see malls being robbed, while on the street, depending on the neighborhood, the operation is safe”, he says. “On the other hand, in a street store there is more proximity to the consumer, the customer can have a prosecco with the manager, for example”.

Other attributes linked to shopping malls, such as offering convenience and encouraging impulse purchases, lost steam during the pandemic. Online sales, especially through social networks, largely occupied this space.

At the same time, movie theaters, a major anchor for shopping malls, did not recover the audience observed before Covid-19. An important part of viewers has become accustomed to home screens, consuming streaming services such as Netflix.

A sign of the health of the enterprises are Christmas sales, the most important date of the year for retail. According to Abrasce – Brazilian Association of Shopping Centers, sales from December 19 to 25 grew 10.7% in shopping centers, reaching R$ 5.3 billion. Discounting IPCA inflation, which in 2021 was 10.06%, there was a tie. For Abrasce, the result has to do with the macroeconomic scenario, inflation and unemployment, which make the family budget tighter.

“My Christmas income in 2021 was 15% lower than in 2019, no one goes to the podiatrist twice just because it’s December,” says Jonas Bechelli, president of Doctor Feet, a specialist in foot care, referring to the practice of foot care. collection of the 13th rent by the malls, to grab Christmas sales.

“With the digitalization of sales, this type of charge no longer makes sense”, emphasizes Francis, from Ablos. All retailers’ sales are accompanied by software installed by the administrators at the cashier. According to him, the collection of rent is based on a percentage of sales, with a minimum amount guaranteed in the contract (this amount is corrected by the IGP-M).

“Malls need to know that reality has changed: that remuneration they had before no longer corresponds to the reality of shopkeepers”, says Francis, whose family owns the Marília Marques party clothing store chain. Of the 24 stores in 2019, 18 were closed during the pandemic, all in malls. One was opened on the street.

“It is becoming unsustainable to stay in the malls, in some stores the readjustment of the last two years reached 38%. We are doing traction to go to the streets, there will be no alternative”, says Bechelli, from Doctor Feet, who analyzes the possibility of migrating to strip malls – a business model that brings together stores in the open, with free parking, similar to an outlet mall, but smaller.

With about 80 stores in 11 states and the Federal District, most of them in shopping malls, Doctor Feet closed 10 points in the ventures during the pandemic. “Malls have shown themselves to be very inflexible, negotiation has been very exhaustive, from each shopkeeper to each venture. We have to ask for a blessing to survive”, says Bechelli.

The Morana accessories chain, which owns 278 stores, has only migrated one store from the mall to the street so far. “It is not a simple maneuver”, says Danilo Assumpção, executive manager of the Ornatus group, owner of Morana. “The will exists, but it is necessary to wait for the end of the five-year contract with the mall or pass the point, so as not to have to pay the fine, which is very high”, he says, noting that it is also not easy to find good points. in the open.

Of the total of the chain, 85% of the stores are in malls. In part of the projects, Morana filed revisions to the contract, questioning the high rent adjustment. “Many stores only returned to 2019 revenue in the last quarter of 2021”, says Assumpção. “How will I operate with 2019 revenue compared to 2022 costs?”.