PROTECTING REDEVELOPMENT OPPORTUNITIES IN RETAIL LEASES

2/24/2020 | Articles & Alerts

National retail tenants normally desire that the site plan of the shopping center not change from what is initially attached as an exhibit to the lease, and that the height of the other buildings not exceed one story in height (and sometime not exceed the height of their premises); however, such a provision will severely limit the ability to reconfigure the shopping center to maintain, keep and create value in the event of future vacancies. In recent years, landlords have been able to save failing retail centers by adding multi-story residential and office uses, as well as restaurant pads, in areas that may not have been identified on the original site plan for the shopping center. Therefore, it is important for landlords to keep as much freedom as possible to reconfigure the shopping center.

Control over the site plan is important to the tenant for three main reasons: visibility, parking and access. The visibility of the premises from the adjacent roads and within the shopping center is a key factor for having a successful store. However, after evaluating the sight lines of the shopping center from the adjacent roads and factoring in any pylon signage being provided, the tenant might realize that there is only a limited area in front of the premises that has a material impact on such visibility.

Available parking spots in the parking field in front of the premises is clearly important to the tenant to attract customers and not dissuade them from going to a competitor’s store located nearby (or electing to purchase any needed items from a competitor on-line). The tenant also might be concerned over any overflow parking from other areas of the shopping center; however, this might be resolved by adding a minimum parking ratio for the shopping center.

Access roads are also very important for a tenant in order for customers to have easy access to the parking field immediately in front of the premises, as well as to ensure that the tenant’s trucks will have access and turning ability in order to deliver inventory to the rear of the store. The tenant, however, might only be concerned about the main entrance to the shopping center, and not expect their customers or deliveries to be using all of the ancillary entrances and access drives.

As a result, instead of granting a tenant complete control and approval rights over the entire site plan, a landlord and tenant should agree upon specific “no-build” areas in order to protect the foregoing key items. Identifying such specific areas in the parking fields and access drives that a landlord will not be able to modify should satisfy the tenant’s concerns, while also giving the landlord some flexibility in the future. Also, a landlord and tenant should agree on which portions of the shopping center should have height limitations, so that some areas can have the ability to be multi-story residential or office buildings.

Even if a landlord intends to keep the shopping center as currently constructed, circumstances can change, vacancies can arise, and a future ability to create more value can happen. As a result, negotiating “no build” areas, height restrictions and parking ratios are some of the most important parts of a lease negotiation with a retail tenant.

For further information, please feel free to contact Scott C, Butler, Esquire at (610) 941-2560 or sbutler@kaplaw.com