Renting to Holiday Pop-Ups

Q: There are several vacant spaces in my shopping center. With the holiday season coming up, I’m worried that increased foot traffic from holiday shoppers that has always boosted profits in the past will be lured away by fully leased centers nearby. I’ve been approached by specialty “pop-up” tenants that want to rent space for just the busy holiday season. Should my leases with temporary tenants differ from my standard leases?

A: Yes, most likely. Many owners use temporary leases with pop-up tenants. Licenses are often used for kiosks. Ask your attorney about the type of arrangement that’s best for your situation. However, there are additional considerations that center owners must consider before leasing to pop-up shops. These types of tenants can provide many benefits for certain malls: They can generate cash flow in between permanent tenants and renew market interest in a space that has been vacant for an extended period of time. But specialty pop-up shops aren’t ideal for every retail property. Consider these factors before signing a lease with such a tenant.

Existing lease obligations. Think about how renting to the specific pop-up tenant will affect your lease obligations to existing tenants. That is, will it violate a cotenancy clause? And think about whether the pop-up shop’s logo violates the signage provisions in other leases at the center. You should ask your attorney for help if you’re unsure about whether these issues will affect you.

Displays and signage. From a practical standpoint, you should realize that holiday pop-up shops often have elaborate displays and signage that are time-consuming to put up and dismantle. You’ll have to determine whose responsibility it is to install and then remove displays and signage—and make sure that this is covered in the lease. Typically, the pop-up tenant should handle the cost and the labor, but smart owners will be sure to be included on the layout and construction plans. Require in the lease that the tenant gives you a security deposit so that you’ll be left with funds to remove fixtures and displays if the tenant refuses to when it moves out.   

Insurance. All pop-up tenants should be required to have insurance. Consider conducting inspections during the temporary lease to make sure that the pop-up tenant isn’t posing any risks to the center or other tenants.

If you’re careful to protect yourself when renting to pop-up shops that are appropriate for your property, you can use them to draw attention to your center to showcase the soon-to-be-vacant space for prospective permanent tenants, or even nonseasonal pop-ups that can continue to bring in a profit while you wait for a long-term business.