Tenant Bankruptcy: The Retail Realty Rollercoaster You Can Master!

Marc Perlof • October 28, 2023

Hey, Retail Real Estate Rockstars! When a tenant files for bankruptcy and refuses to renew their lease, as Rite Aid has started to do, it may be extremely difficult to navigate the waters of retail real estate. This unexpected turn of events may leave property owners struggling to maintain a consistent income flow and occupied properties. You may, however, hit back with enthusiasm if you have the appropriate information and approach. Here’s the lowdown:


When a tenant rejects a lease due to bankruptcy:

  • It can lead to a sudden loss of rental income which could affect your ability to cover mortgage payments or other property related expenses.
  • If other prospective renters think the site is less appealing, the vacancy may discourage them.
  • It requires more money to promote the area again and could require renovations to draw in new renters.

What happens to the rent that is owed by the tenant?

  • Pre-Petition Rent Arrears: The outstanding rent till the date of bankruptcy filing is considered pre-petition debt. This debt is now unsecured, and unfortunately, stands in line possibly behind other creditors, waiting for a slice of whatever assets are liquidated.


  • Post-Petition Rent: Post the bankruptcy filing, if the tenant continues to occupy the space, they are required to pay rent. This portion is considered an administrative claim, generally standing in a higher priority than unsecured claims.


Now, let’s tackle this with some solid, actionable steps:

  • Stay Proactive: Keep tabs on your tenants' financial health and be ready to discuss modified lease terms if necessary.
  • Legal Advice: Seek legal counsel to understand your rights and possible recourses in the face of tenant bankruptcy.
  • Restrategize: Assess the market and reposition your property if needed. A fresh coat of paint or a minor remodel could be a game changer.
  • Marketing Magic: Launch a robust marketing campaign to attract new tenants. Highlight the strengths of your location and property features.


A study by the National Association of Realtors showed that retail vacancies hit a high of 7.5% in 2020, reflecting the economic turmoil of the pandemic.¹


According to a report by Reis, the average cost to turn over a retail space can range from $10 to $30 per square foot, depending on the extent of renovation required.²


Don’t let a bankruptcy hiccup turn into a long-term setback. With proactive management, legal savvy, and some marketing jazz, you can reposition your asset(s) and continue rocking the retail realm. For a deeper dive into managing such retail realty hurdles, call, text, or DM me. Let’s keep those retail spaces buzzing with activity and profitability!


Ever thought about how a tenant’s financial health mirrors the vitality of your retail real estate?


Always consult with your Attorney or legal counsel regarding a tenant's bankruptcy.


#RetailRealEstate #PropertyManagement #TenantBankruptcy #RetailRealtyRockstars #CommercialRealEstate

Weekly Perl: A Commercial Real Estate News Recap

By Marc Perlof • October 31, 2025
Fed Cuts Rates Again, Boosting Confidence in CRE Recovery In a closely watched decision, the Federal Reserve cut its benchmark interest rate for the second consecutive month. The new target range of 3.75% to 4% reflects continued efforts to ease financial conditions and stabilize capital markets, even as economic signals remain mixed...

Will LA’s $30 Minimum Wage Reshape Retail Real Estate or Just Empty Storefronts?

By Marc Perlof • October 27, 2025
If you own retail real estate, here’s what might change for you. The hospitality workers’ union UNITE HERE Local 11 is pushing a bold new initiative to raise the City of Los Angeles $30 minimum wage for all city employees by July 1, 2028¹. While the first ordinance covered hotel and airport workers, the union’s latest ballot measure would extend this wage citywide². As an expert in retail real estate, here’s what that means for your properties. Higher wages will immediately impact tenant affordability and rent-to-sales ratio calculations that drive lease viability. Many retailers operate with payroll costs at 25 to 35 percent of gross revenue, leaving little cushion for a wage that’s nearly double the current state minimum of $16/hour³. When margins tighten, tenants face a choice: raise prices, cut staff, or negotiate rent. For landlords, that translates into valuation pressure because commercial property values depend on stable rental income. The small business impact in Los Angeles could be profound. Independent restaurants, boutiques, and service operators, the lifeblood of local shopping centers, run on razor-thin profits. If forced to meet a $30 wage, some may relocate to cities like Burbank or Glendale, where municipal wage laws are lower, or close entirely⁴. That shift could spark short-term vacancy spikes and longer lease-up periods. Still, there’s a possible upside. When low-wage workers earn more, they spend more locally. For well-positioned centers with necessity-based tenants: grocers, pharmacies, quick-service restaurants, rising wages could strengthen revenue resilience. Key takeaways for retail landlords: Audit tenant financial health and exposure to rising payroll costs. Review lease clauses that address operating-cost pass-throughs. Model new rent-to-sales thresholds under a $30 wage scenario. Track tenant retention and market-rent shifts across nearby cities. Prepare for valuation adjustments as cap rates reflect greater income volatility. If you own retail real estate in the City of Los Angeles, now’s the time to stress-test your portfolio. Let’s review your leases before this wage shift hits. Call or DM me for more information. When the $30 wage arrives, will higher pay strengthen LA’s consumer base or hollow out the city’s small-business retail core? #LosAngeles30MinimumWage #RetailRealEstateInLosAngeles #TenantAffordabilityAndRentToSalesRatio #SmallBusinessImpactLosAngeles #CommercialPropertyValuesLosAngeles

Weekly Perl: A Commercial Real Estate News Recap

By Marc Perlof • October 24, 2025
Toys"R"Us opening 10 flagships, 20 seasonal shops — here are all the locations The brick and mortar comeback of Toys"R"Us is moving into high gear ahead of the toy industry’s busiest season. In September, the retailer said that, in partnership with Go! Retail Group, it was planning to open 10 flagships and 20 seasonal holiday shops in the U.S. by year's end...
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