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Developing a shopping center in phases may be a good option for you if you want to begin the project even when conditions for the whole development of it are incomplete. “Phasing” allows you to construct one phase after you get commitments from tenants that they'll lease space in that phase, and then continue constructing additional phases as you get commitments from more tenants.
Two measurements—of the “rentable area” and the “usable area”—of office building space are critical because they are used to calculate the “load factor”—the percentage of the space that is not usable by tenants. Together, the rentable area, usable area, and load factor of a space determine the amount of rent that you can reasonably charge a tenant for it. Be aware that the way you measure your space could work for or against you, depending on which measurement standard you use.
A commercial lease with a food service tenant presents unique challenges that typical retail leases don't. For example, in addition to common retail lease terms, such as exclusive use and common area maintenance (CAM) provisions, you must carve out your right to control additional factors—noise, crowds, odors, specialized trash removal, and extended operating hours—that restaurants, food court, and other food service tenants have a tendency to create.
The National Restaurant Association reports that there are approximately 960,000 restaurants in the United States, which will generate more than $604 billion in sales in 2011. For every dollar spent on food, 49 cents of it will be spent in a restaurant. This percentage is true for all types of food establishments and outlets—and it's increasing.
Disasters have always affected commercial owners who must deal with property damage caused by snowstorms, hurricanes, fires, and floods. Passing disaster-related expenses through to tenants in common area maintenance (CAM) charges can lower your repair bills and boost your bottom line after your shopping center or office building has been damaged. Negotiate with your tenant to obligate it to pay for at least some of the cost of rehabilitating your property.
Facts: An employee of an office building tenant suffered injuries after she tripped and fell on a raised edge of the metal molding surrounding a trapdoor on the floor of the tenant's pantry room. The purpose of the trapdoor was to access a crawl space approximately three feet high that lies beneath the pantry room floor. The employee sued the owner for negligence and New York Health Code violations. She asked the court for a judgment in her favor without a trial.
Facts: A career center tenant signed a lease with the owner of an office building to rent space in four office suites for an initial term of 124 months. The building was sold, and the tenant and new owner extended the lease. The owner later claimed that the tenant had defaulted on its lease, and it sued the tenant to recover the space. The tenant claimed that the owner could not evict it from the four suites, because it hadn't delivered two notices properly according to the lease terms. The owner asked the court for a judgment in its favor without a trial.
High-risk tenants, such as liquor and gun stores, pose potential dangers that typical retail businesses don't. But because alcohol and guns are available at limited locations, these high-risk tenants have a captive audience of customers that create a steady income stream, lessening the chances that they will default on rent or move out before the end of their lease terms.
Although the commercial real estate market is steadily improving, tenants still are negotiating aggressively for lease terms that they otherwise wouldn't have been able to get before the downturn. During that time, most national tenants—whether or not they were struggling—asked their owners for rent abatements. But some tenants with a lot of clout asked for either a profit-sharing or a percentage ownership agreement—rights that can be much more lucrative.
If you've signed a “governing document” with the owner of an adjoining shopping center or the tenant of a freestanding building at your center, you've agreed to be subject to certain restrictions. A governing document—which can be an operation and easement agreement (OEA), a reciprocal easement agreement (REA), or a declaration of covenants, conditions, and restrictions (CC&Rs)—dictates how issues like parking, signage, construction, or use will be handled.
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