Retail Tenants Adjust to Mixed-Use and Lifestyle Centers
If you haven’t been to the mall recently, you might not recognize it. The traditional enclosed shopping center is undergoing a major transformation. Empty department stores are being reconfigured or demolished, parking structures are being built to free up surface parking areas for development, and outdoor lifestyle centers are being constructed as extensions of enclosed mall areas. Big box tenants are relocating stores from nearby strip centers and power centers and learning to live with theaters, health clubs, restaurants, and other parking-intensive uses that they previously shunned. Bewildered mall tenants are reading their leases and discovering that their “exclusives” don’t apply outside the enclosed mall or that they allow the Landlord to lease to competitors for the price of a partial rent abatement. Attorneys, brokers and in-house real estate advisors representing retailers in shopping center leasing transactions must focus on some new issues in order to obtain a lease that anticipates this new environment.
1. As parking is shifted to multi-level structures to allow development of surface lots, tenants must protect those parking areas, both old and new, which it determines are of key importance. The requirement to maintain an overall parking ratio at the shopping center will remain important, but perhaps equally important is requiring Landlord to protect the parking areas most convenient for customers of the demised premises. In mixed-use projects, make sure zones for retail customers, residents and guests, and office workers and visitors, are clearly established. If you are operating a restaurant on a pad near the residential or office component of a mixed-use project, it is imperative that your parking field is off limits to residents and tenants of such component, and that you have the right to have violators towed. If valet parking is provided, designate where the valets may park the cars. If the center is near a stadium, arena, fairgrounds or similar venue, determine whether patrons of the venue may park at the Shopping Center.
2. Signage. There are many areas of the mall available for signage. Mall directories, center court, directional signs, electronic message boards. Make sure tenant is treated at least as favorably as any other similarly sized tenant at the Shopping Center.
3. In a multi-level center, protect access routes from common areas to premises both horizontally (between points on same level) and vertically (from lower and higher levels). Escalator and elevator locations should be protected, with some flexibility for Landlord to relocate within area shown.
4. Protect access and visibility from carts, kiosks, ATM’s and other obstructions; these are a fact of life, but try to get the Landlord to agree to a zone around your premises that will be free of them. Also protect access and visibility during mall remodeling; construction barricades and detours can make stores invisible or undesirable to all but the most loyal of customers. Construct a remedy that requires the Landlord to reimburse lost sales based upon sales for similar periods during prior years; a rent abatement will not adequately compensate a retailer buried in a construction area. Require Landlord to paint your logo on “open during construction” signs on barricades and on temporary signage along paths of travel between your premises and other portions of the mall.
5. Make certain you have a clear understanding of what the Landlord owns or controls and exactly what portion of the development is included in the definition of “Shopping Center.” If an area is marked “not a part of shopping center” on a site plan, is it because Landlord does not own or control that area or because the Landlord arbitrarily decided it was “not a part.” If you are in “Phase 2” of a project, determine whether Phase 1 is included in the definition of Shopping Center, and if not, consider whether any of your protections need to apply to Phase 1. Department store uses may be out of Landlord’s control now, but your client’s exclusives should apply to such premises if and when control of the same reverts to Landlord.
