The rise of e-commerce and the struggle many brick-and-mortar retail stores face is nothing new. Customers are increasingly choosing to shop for clothes, furniture and even groceries from the convenience of their own homes. More recently, however, this shift in the way consumers shop has given rise to new types of retail stores – small showrooms and “pop-up shops.” While showrooms are not entirely new concepts, purely digital companies are increasingly opening up physical showrooms where customers can see and touch merchandise before deciding to buy, while the actual transactions often remain online. Pop-up shops – another retail store model – allow retailers (often online or seasonal retailers) to have a physical presence for a limited duration to essentially test run whether a permanent store would be lucrative. Continue Reading From Digital to Physical: New Considerations for Retail Leasing with the Rise of E-Commerce into Physical Spaces
Most retail tenants desire to locate their respective businesses amongst other retail businesses in malls, retail shopping centers or other mixed-use centers. Therefore, when negotiating retail leases, some of the most heavily discussed provisions involve the tenant’s share of Common Area Maintenance (“CAM”) expenses. CAM expenses essentially determine how much money a tenant will contribute to the upkeep and maintenance of the surrounding shopping center owned by the landlord. Continue Reading Considerations When Negotiating Common Area Maintenance Costs in Retail Leases
E-commerce and online shopping are here to stay, but the explosion of new technology and the number of resources available to facilitate online shopping is an opportunity for retailers to embrace new ideas and concepts that will increase foot traffic to their physical locations. The store-within-a-store concept isn’t new, but the type of store-within-a-store retailers have conventionally seen is changing and bringing in new business. Continue Reading Retailers Should Ensure Flexibility in Lease Agreements for In-Store Partners
On August 21, 2017, New York Attorney General Eric T. Schneiderman announced that Simon Property Group settled claims that it used anticompetitive tactics to prevent development of competing outlet centers close to Woodbury Common center in New York. Leases with retailers at Woodbury Common included a clause preventing the retailers from opening another location within a 60 mile radius of the outlet center—a radius that encompassed the entire New York City area. Continue Reading Simon Property Settled with NY AG Over Outlet Centers Restrictions
It’s probably painfully obvious to companies in the retail industry and beyond that the old paradigm of the retail shopping center is being permanently altered by e-commerce, as well as changing consumer preferences. As the old-guard stalwarts of retail begin to shutter stores or fold completely, it is up to both landlords and existing anchor tenants to adapt to the changing landscape, or risk prolonged periods of high vacancy.
One of the areas which can hamper efforts to re-tenant spaces are the restrictive covenants contained in both declarations governing shopping centers and in anchor leases, put in place with the justification that such concepts are not retail-oriented or are parking intensive. As consumers move towards a more experience-based retail experience (i.e., restaurants, entertainment and fitness concepts), landlords may find their hands tied by such restrictive covenants when it comes to leasing vacant spaces. In light of this, landlord’s should be reviewing their restrictive covenants both in declarations and leases any time a lease is being amended, modified or renewed which may contain leasing restrictions.
Careful attention should be paid to those restrictions that can affect leasing to post-e-commerce era concepts, such as restaurants and small format fitness centers, both of which are becoming an increasing share of retail centers. Unless these issues are tackled head on, landlords may find themselves with vacant spaces for extended periods of time, which harms traffic to the shopping centers and, consequently, traffic to existing tenants. Landlords may find that tenants may be more willing to play ball on dropping these restrictions if they come to the realization that extended vacancies harm tenants more than the parking issues that these restrictions are intended to protect against.
The Santa Barbara City Council, in an effort to combat the retail malaise on State Street in Downtown Santa Barbara, has approved a pilot program that would streamline the permit and review process for potential commercial tenants. Continue Reading Santa Barbara City Council Strikes Back Against Retail Malaise
Retailers should mark January 1, 2020, on their calendars. It’s the date R-22, a hydrochlorofluorocarbon-based refrigerant being used in roughly 50 percent of all HVAC equipment, is set to phased out. Most triple-net commercial retail leases provide that tenants are responsible for the maintenance of their HVAC systems. Continue Reading R-22 Refrigerant Phase Out Will Impact Most Retail Leases