Pros, cons of seasonal business ventures

Halloween is just weeks away, but the setup work of the seasonal retailers selling Princess Anna costumes, Donald Trump masks and fog machines has been going on behind the scenes for months now.

Preparations for the Halloween Custom Warehouse just east of Sunshine Street and Campbell Avenue began before the spring flowers bloomed, said Sok O, Party City franchisee.

“Ordering needs to be done in February and March. Then, we look for a place to open April through July,” he said. “They can be hard to find sometimes. They can fill up pretty quick.”

Curtis Jared, CEO of commercial property management firm Jared Enterprises Inc., said he tries to be selective when it comes to working with seasonal retailers. This spook-filled season, he’s leasing to one: Spirit Halloween, in the Town & County Shopping Center, 2633 N. Kansas Expressway.

“You’ve got to be careful with them because if you have a tenant wanting to move into a space, and you’ve got them in there for a two- to three-month period, you could potentially lose out on a deal,” Jared said, adding he has an unnamed prospect for the Spirit site after it exits in November.

Commercial property tracker Xceligent reported a 5.1 percent retail vacancy rate for the Springfield market in the second quarter. In recent years, Xceligent reported the local vacancy rate generally held several percentage points below the national vacancy rate. For Jared, filling a space with a paying client is better than leaving it open, but not if it could jeopardize other long-term leasing relationships, so identifying the right fit can be tricky.  

And finding the right location is important to O and others because Halloween isn’t just about securing sweet treats. It’s about cash in hand.

According to the National Retail Federation, over 157 million Americans are expected to celebrate Halloween this year to the tune of nearly $7 billion. With eight in 10 millennials saying they already are making plans with friends, the average American celebrating the holiday intends to spend $74 on decorations, candy and costumes, which is down about $3 from 2014.

Trisha Lombardo, a spokeswoman for Egg Harbor Township, N.J.-based chain Spirit Halloween, said Springfield is home to two stores. The company also opened in the James River Center at 1839 E. Independence St. Spirit Halloween, a sister company to Spencer Gifts LLC, operates 1,150 specialty Halloween store across the United States and Canada. During the early fall, Lombardo said the company employs roughly 20,000 workers.

“Our locations will open as early as mid-August in some places,” Lombardo said, noting stores usually operate for six to eight weeks. “All of our stores are temporary leases. Then, on Nov. 1, they close. By the last week in September, about 95 percent of our stores are already open.”

She declined to disclose the privately held company’s revenue, but disagreed with NRF projections and said she felt 2015 revenue would be higher than 2014 because Halloween lands on a Saturday this year. Spirit Halloween, she said, is planning for more parties.

“It’s more like a Halloweekend,” she said.

While the chain only has stores open for a couple of months a year, Lombardo said its real estate team works year-round, as does its human-resources department.    

O, who built a $1.2 million Party City store at 2620 S. Campbell in August, said he opens a separate Halloween store each year to meet demand for costumes and decorations.

This year, his Halloween Costume Warehouse is in the former Fitness 19 space at 210 E. Sunshine St.

One of the advantages of running a temporary store is that he isn’t obligated to carry only merchandise sold through the Party City chain.

“Costumes come from all the vendors, vendors everywhere, not just Party City,” O said. “So you can carry items that Party City doesn’t carry.”

Commercial listing agent Mike Fusek of Sperry Van Ness/Rankin Co. signed Halloween Costume Warehouse to a triple-net lease of $10 per square foot at the 10,000-square-foot Sunshine Street property. Fusek, who began listing the space in second-quarter 2014, said the terms are equivalent to long-term tenant leases.

“We’ve done a few each year during the recession, and now it is much harder to find suitable locations,” Fusek said by email, noting typical terms are three months long so the retailer has time to deliver merchandise.

Seasonal lease deals with Jared Enterprises are typically paid up front.

“Sometimes they’ll pay you all up front in a lump sum or half up front and the rest during the term, but usually, it’s a lump-sum negotiated price,” Jared said.

Halloween isn’t the only holiday that draws seasonal retailers to the surface. Jared works with R&S Floral in the spring to meet flower needs around Memorial Day.

“I’ll typically try to get stuff that I think will complement the center and be a traffic draw. I, personally, try to be careful with pop-up stores that could compete with my tenants because my tenants have committed to longer terms. The pop-up stores want to pop up for the best part of the season and then close shop,” Jared said. “At the end of the day, you want to keep the integrity of your center.”