Leasing to a Pop-Up Shop? Watch for Hidden Risks

Jay Taylor
Once confined to Halloween and holiday fare, pop-up stores have proliferated, selling everything from fine silk to skater gear. For retailers, pop-ups can be a way to move from online to a brick-and-mortar presence, generate buzz for a new or growing product line, or move large quantities of inventory.

If you own or manage commercial real estate, pop-up shops can make good business sense for your firm, too. Need to fill vacant space and bring in revenue at the same time? Want to draw more people in with popular products? Looking for potential leads to long-term leases? Pop-ups might be the answer.

But before you sign that next short-term lease, consider the potential downsides. New pop-ups can introduce unanticipated risks that the space may not have been designed to address. Here are a few examples:

Unique products can present unique risks. Consider hoverboards; they were wildly popular – and unexpectedly dangerous – when introduced. Cutting-edge products may draw crowds, but they may not have undergone rigorous safety testing.

The takeaway: Know all of the products the retailer plans to sell. Assess how well the retailer is managing risks and how well your facility is designed to handle the potential impact on people and property.

Demonstrations: A simple product (like food) may seem fairly harmless. But it could suddenly pose new risks when it’s sold creatively (for instance, by cooking it). Even if the retailer has considered fire safety, employees may not have been adequately trained to minimize the risk.

The takeaway: Ask about not just what products will be sold, but how. The retailer should have a formal plan for addressing and minimizing any risks associated with not just products, but product demonstrations.

Traffic: It’s good for you if a pop-up store attracts additional customers – unless the shop draws in more than the space is designed to handle. If the space is too small or not properly designed for the crowd, the potential arises for trip-and-fall scenarios or even violence if tempers flare.

vacant retail storeThe takeaway: Consider not only the space the retailer will be using, but also the adjacent area. Is there adequate room for entry and exit? Does the retailer’s floor plan facilitate traffic flow?

Pop-up shops can be a creative way to bring new revenue and new excitement to your property. If you invest extra time in getting to know your potential tenant and understanding how their business aligns with your space, you’ll both be well positioned to flourish.

Jay Taylor, CSP, ARM, is Vice President within Chubb Risk Engineering Services. Mr. Taylor has more than 26 years of experience in the casualty risk engineering field and has deep expertise working with clients in the real estate and hospitality industry.

Categories: General Risk, Property
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