Summary
Borders flagship Chicago store has long been rumored to be in trouble and not likely to exercise its' renewal option. It now has renewed but only for one year.
Analysis
The Borders Book store on Michigan Ave. in Chicago is easily one of the very best high trafficked locations in the world. It is positioned directly across the street from Water Tower which is the highest volume vertical mall in the world. Every single attribute any retailer could want is contained in this location. It is highly visible, has as much foot traffic passing its' front door as any location in Times Square and has signage that most retailers would consider as being worth the most expensive "Billboard" imaginable.
This article finally confirms the rumors of just how poorly this store is doing "profit wise". They had an option to renew for five more years that they chose to allow to lapse. Instead they renegotiated a new one year lease at a significant reduction in rent which the owner agreed to because they believed they could get a higher rent in 2011 than they could in 2010 when Borders planned to vacate. A smart move for both landlord and tenant.
However, what the GLG News reader should "take away" from this analysis is two things.
Thing one is the obvious questions it raises about Borders ability to continue as a profitable retailer if they can no longer make money in one of the world's best retail locations.
Thing two is the obvious questions it raises about the state of the recession generated rent levels that is permeating even the most desirable retail locations.
It is my opinion that this is a most important article and acts as a leading indicator of what is happening to commercial rents all over the country.
As the song says, "........if you can make it here (NY) you can make it anywhere......". Conversely, if Borders can't make it here, (Chicago) can they make it anywhere?
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
