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Landlords find creative ways to fill retail spaces

ewalker@MiamiHerald.com

When the Fort Lauderdale Children's Theatre first approached Galleria Mall about leasing rehearsal and classroom space, the organization knew it was a long-shot.

Would the prime regional shopping mall in East Fort Lauderdale be willing to rent space at a below market rate to a nonprofit organization?

In the midst of the real estate boom, the answer would have been a resounding ``No.'' But times have changed. Bankruptcy has left a trail of retail vacancies including Circuit City, Linens 'N Things and Sound Advice. Plus many national retailers are putting the brakes on expansion plans. That's forced some South Florida landlords to get creative in order to fill space.

Galleria's short-term deal with the theater group is one example of an increasing number of nontraditional tenants finding their way into former retail spaces in both regional malls and neighborhood strip centers.

Depending on the location, some landlords are willing to consider a variety of uses: medical clinics, doctor's offices, schools, day care centers, kid's play gyms and office space. The Boynton Beach Mall is even adding a museum.

It's all part of South Florida's new retail real estate paradigm, which has brought the first declines in lease rates in more than a decade. The landlord is no longer the one pulling all the strings and more than ever it's a tenant's market.

Landlords are increasingly flexible on everything from nontraditional tenants to shorter lease terms, rent concessions and temporary uses.

``We're all taking a little more risk to make it happen,'' said Alan Esquenazi, senior vice president with Continental Real Estate Cos. ``And we're doing it with tenants who do not have Wal-Mart credit.''

At the end of the day it's all about filling spaces.

``Vacancies are like cancer: They spread,'' said Doron Valero, managing partner of Global Fund Investments, a Miami Beach real estate acquisition and development firm. ``You want to turn the lights on as soon as you can and generate traffic to the center. It's not just about the lost tenant, it's the traffic that the tenant generated for the center.''

Since the Children's Theatre moved into Galleria in April, several hundred kids and their parents come each week to the mall for rehearsals and classes. They have brought traffic and life to the increasingly vacant east end of the mall that Lord & Taylor once called home.

``We definitely would not have been able to afford it at market rent,'' said Janet Erlick, executive artistic director of Fort Lauderdale Children's Theatre. ``What's exciting from my perspective is that we were able to offer something for them as well.''

The Children's Theatre has a two-year lease with the mall and an option for a third year. But the early success has already prompted discussions of a possible longer-term deal to use part of the former Lord & Taylor for a performance venue.

Mall Manager Mark Trouba said the current deal with Children's Theatre has already helped solve multiple problems.

``You're not going to find a traditional retailer to go back in a corner where the traffic doesn't meet their needs,'' he said. ``The additional traffic the Children's Theatre generates is going to help with our restaurants and the other retailers in the area.''

Creative leasing is a necessity as retail landlords wrestle with some of the highest vacancy rates they've seen in almost two decades.

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