Tag Archives: landlords

Real Estate Lessons Learned: Borders

22 Jul

As many of you may have heard Michigan-born business Borders is slated to liquidate many of their stores after years of fighting fiscal turbulence. This announcement may be a surprise to some but a predictable outcome for many who have been watching the once booming giant over the past few years.

Many experts have suggested that the number of physical stores and lease durations have had a profound impact on Borders demise. With over $1 billion in lease obligations the company has simply expanded too soon. But what is left of the 500 plus stores that are slated to be chopped?

I am particularly interested in how this will impact job lost here in Michigan, and especially the implications it has for real estate values in locations it exists. The physical store has truly been a critical element in the survival of company and serves as a lifeline for the future yet also proposes challenges for the company’s sustainability. According to AnnArbor.com the most concrete example of this is when “the company admitted in late January that it had stopped making rental payments on some of its stores.” Nationally, a little over 10 Borders stores are listed for sale, most of which 20,000 square feet or more in size having a profound effect investor risk and consumer outlook.

Other factors to consider include the time and expense to the owner if a store like Borders leaves. Most owners have a level of uncertainty about their investment. Some experts believe that retailers are looking to expand their stores in soon-to-be empty spaces like Borders. The company has a reputation of being very disciplined about taking the best locations in the marketplace. That bodes well for landlords, and ultimately communities. It’s also part of the long history of the local company that became a national name.

This in my opinion has profound effects on in the residential real estate sector. Lost of jobs and the economic consequences of a huge company like Borders leaving, could have profound effect on former employees ability to live sustainable lives, which creates a unique challenge for many real estate professionals.

Many cite Circuit City as a case study. About 30,000 people lost their jobs as 567 stores closed. Many believe Borders can avoid creating economic unrest be revamping the company’s infrastructure.

What do you think? What will it take for Borders to survive?