Interstate Tenant Side Menu Logo
Sign up for our newsletter and get access to our latest money saving techniques for tenants in industrial spaces!

Interstate Tenant Saves Michaels $2.6Million After Lease Renegotiation

Michaels Stores is a chain retailer that sells arts and crafts, home décor, and seasonal products in more than 12,000 stores throughout the United States and Canada.

Challenges

Michaels was nearing the end of their lease on a 690,000 square foot distribution center in Hazelton, Pennsylvania. They were already paying below-market rent, however, their lease renewal option was listed at the current market price. Suddenly, they were exposed to a sizeable increase. This raised concern because Michaels had invested substantial capital into their building to support both in-store and e-commerce fulfillment. In order to reduce their fixed cost structure, it was in their best interest to negotiate a lower lease payment.

Solution

Michaels wanted to remain in their current space. Still, our team created viable alternatives to provide them with some flexibility if relocation were necessary. The process involved

  • Conferring with Michaels’ teams in real estate, operations, and finance to discuss possible scenarios that would help them meet their corporate objectives 5, 10, and 15 years down the road
  • Investigating viable relocation options in Maryland and New Jersey
  • Examining the transportation infrastructure in Maryland and New Jersey
  • Researching the real estate values, real estate tax costs, and labor rates in Maryland and New Jersey
  • Considering expanding their existing building to accommodate planned business growth.
  • Performing a supply chain study

Ultimately, several locations were chosen and negotiated to a point where relocation would not cause Michaels financial strain.

Results

Renewed Lease for 10 Additional Years

Restructured Lease & Reduced Rent Payments by $2.6 Million

Negotiated an Additional 5-Year Fixed Lease Renewal Option