Retail leasing terms to look out for.
As the title says, what are some important terms that you'd recommend looking out for a retail lease?
Our team is about to start DD on neighborhood center, with an anchors and in-line tenants. This is my first time doing a true retail property like this and, due to my lack of experience, I'm curious if there are any key terms that differ from office leases.
I've worked on a couple mixed-use projects, but I'm under the impression that anchored retail is a different ball game than your average/small retail tenants.
Thanks, I appreciate you guys!
Here are some off the top of my head. Some may overlap, but just listing off
This is a good start^
I'd also look out for an easement(s) with adjacent property. Are there any outparcels? If so, are they on a ground lease? Who owns the building? They aren't tough to underwrite but it's important to understand the difference.
Great additions! Also, another add is bankruptcies on the horizon for anchor tenants.
Yup, another common structure to these leases is tenant paying landlord a % of their sales every year, subject to a cap, etc. This can be a huge part of a deal.
Not in retail specifically, but another can be extension options (to consider optionality on ownership side and where market rents are now, long term plan for asset). Also, what type of tenants are you targeting, typical percentage rent structure in your market for big box retail and smaller tenants. Looking at nearby centers to target optimal mix and specific tenants. Synergies between retailers.
Go dark provisions, to the last point don't want a dilapidated, vacant retail center.
Candidly to me, seems a lot of neighborhood centers have the same thing (grocery store, pharmacy type use, small retailers, food) the biggest differentiator is upkeep of property.
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