Mall owners have found a way to remedy the vacations department stores and other big box tenants have left at their properties amid the COVID-19 pandemic – housing public schools that need the extra space, The Wall Street Journal reports. The owners focused on the 7,500 charter schools across the United States. Charter schools are publicly funded institutions that usually have to find and finance their own buildings.
With land at a steep price, especially in cities, charter schools and mall owners have found a way to help each other. Dozens of charter schools and other public schools have rented space in shopping malls, according to public records. For example Gem Prep: Students at Pocatello Charter School in Chubbuck, Idaho go to class at a former Sears department store in Pine Ridge Mall. Meanwhile, Watsonville Prep School in northern California is considering leasing space in a commercial building from a former department store.
In Queens, New York, a charter school of 400 college students signed a 32-year lease for space at Justice Avenue Tower, the Wall Street Journal reports. The Central Queens Academy Charter School will join a mixed-use project that also includes medical offices and over 180 condominium units. The school will use 85,000 square feet of space over three floors, accommodating 900 students from kindergarten to grade eight. The lease includes a 4,000 square foot gymnasium in a neighboring lot that is slated to open in 2024.
âBefore we founded the school, we planned to divide the space for doctors’ offices,â said Steve Zhu, vice president of real estate brokerage firm Compass, who represented the owner, United Development & Construction Group, in the agreement to The Wall. Street newspaper.
Short-term deals make CRE owners reluctant to rent to schools
However, CRE owners were not always in favor of leasing space to educational providers. Schools often need more entrances and require wider stairs than other tenants. Educational institutions also need space for a gymnasium and lots of natural light, making renovations expensive.
Lease terms can also be shorter than landlords would like – local school boards review school charters every three to five years. There is always a risk that a school will lose its charter due to poor performance. A school could also leave the space to merge with another institution. Either way, the potential short-term nature makes it difficult for owners to determine the creditworthiness of school operators.
However, schools looking for retail space have tried to give homeowners peace of mind. They note that the charters are generally renewed. There’s also the fact that charter schools are probably more stable than a lot of retailers in this current climate.
âThey look like startups or a single-purpose entity, but you get guaranteed government funding as long as they keep operating,â said Stephen Powers, partner at nonprofit Transwestern Real Estate Services, investment advisor. immovable. Street newspaper.
Benefits of leasing commercial space to charter schools
Homeowners may view leasing commercial space in schools as a risky proposition, but there are potential bonuses. Extra business is a good example – while students are in class, parents can shop in other stores or eat at the mall.
âWe’re getting more foot traffic,â Don Zebe, a Pocatello-based trading broker with real estate brokerage firm Colliers International Group, told the Wall Street Journal.
It is always possible that schools are subject to questionable financial and leasing transactions, but these cases are more the exception than the rule.
âAny industry is going to have a bad player or two,â Mark Medema, executive director of the Charter School Facility Center of the National Alliance for Public Charter Schools told The Wall Street Journal.
He also noted that working with honest developers and brokers who do their research could reduce the number of people who would try to take advantage of the school.
âCharter schools haven’t really established a relationship with the real estate industry,â Medema said. âThey don’t have a real estate office in the school district, and they’re on their own.â
While not ideal, landlords will sign leases for public schools that need a home in the short term. Students from Downtown Burlington High School in Vermont went to class at a former Macy’s in March after toxic chemicals were found in their school. The area under the retailer’s escalator was a popular meeting place for students and their supervisors.
âIt’s become an amazing place for people to connect,â said Lauren McBride, the school’s acting principal.
Joe Dyton can be reached at [email protected].