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Orange County Legal Blog

Developers may need to rethink what an anchor tenant is

Shopping centers, outdoor malls and indoor malls have all traditionally relied on prominent, well-known retail stores to draw customers here in Orange County and elsewhere. Large department stores used to fit the bill when it came to finding anchor tenants for retail developments. As the consumer landscape changes, developers may need to rethink what constitutes an anchor tenant.

Anchor tenants provide the primary draw for consumers to a particular retail location. While an individual is at the retail center, he or she might check out the other, smaller stores and make purchases. Department stores and grocery stores used to make the best anchor tenants.

More considerations before signing a commercial lease

We recently blogged about various considerations a business owner must account for prior to signing a commercial lease. However, commercial lease transactions are complicated, and books can be written (and have) on all of the ways a business must protect itself when signing a commercial lease. Below are a few more important items to consider. 

Grace

Does the lease include a grace period? Not every month will be a good one, financially speaking. Make sure that the lease does not allow the property owner to hold the tenant in default right away. A grace period could provide the opportunity to make up for any shortcomings in the rent. 

Developers may look to boutique industry for new tenants

Consumers here in California can log onto their computers and purchase just about anything from nearly anywhere in the world just like everyone else. This new way of shopping has put a dent into the traditional brick and mortar method, but it has not killed it just yet. Developers may still find tenants for new developments by looking to the boutique industry.

When consumers know what they want, they turn to online retailers such as Amazon. However, when they are not quite sure, the turn to brick and mortar stores. More than that, they turn to smaller stores that specialize in one category of goods for which consumers are searching.

Before signing a commercial lease, consider this

As a business owner, you understand that Orange County real estate is a competitive market. There are new construction projects happening around the clock, and the city always seems to be building.

While this may seem like it puts renters at a disadvantage, it also offers businesses lots of options for rental property. When you’re looking for a new location, it’s important to consider this specific aspect of a commercial lease:

When a commercial tenant and landlord don't get along

You may believe that since your lease outlines all of the rights and responsibilities of the parties, that everything will be smooth sailing. After all, you spent a significant amount of time negotiating it, so everyone should live up to his or her obligations. Sadly, that is not always the case whether here in Orange County or elsewhere. A commercial tenant and a landlord do not always get along.

When disputes arise, your commercial lease should be the guidepost for resolving it. Perhaps the matter is just a misunderstanding of a provision of the lease, and a reminder is enough to get the landlord/tenant relationship back on track. If that proves not to be the case, it may be necessary to take further action.

The changing face of malls and shopping centers

Developers here in California and across the country have known for some time that they need to change their tactics when it comes to retail developments. Malls and shopping centers are no longer the retail meccas they once were. Thanks to online shopping, these establishments must adapt or risk completely losing their relevance.

One vision of the future includes malls that use smart technology to make customers' experiences more enjoyable. In addition, these locales could host events, pick their own produce and have a nice dinner. Shopping centers could become "micro-cities" where people could shop, enjoy entertainment and have a nice dinner. It also would not hurt to throw in a unique experience on occasion.

The terminology of your commercial lease matters

California small business owners know how difficult it can be to find the right space from which to operate a company. Finding the right place at a price that works for the budget may tempt a business owner to move forward as quickly as possible, but it is prudent to be careful and cautious regarding the terms of a commercial lease. It is beneficial to first understand the different types of commercial leases before signing.

The type of commercial lease matters significantly for a business. It can affect payment amounts and various other factors. The terms of many commercial lease are negotiable, and it is possible to work for the terms and type of lease that will work best for the specific company and minimize exposure to financial risk.

A commercial tenant may want to review operating expenses

Accepting the first draft of a lease would probably be a mistake in most cases. Instead, a California commercial tenant may want to review the terms to make sure they are fair. One of the places where a budget for retail space could be busted is in the operating expenses, so they need particular attention.

While it is normal for a property owner to pass operating expenses to the tenant, it does not mean that the tenant should just accept whatever is in the lease. One of the first things to do is ask the property owner for documentation of the taxes, operating expenses, utility charges and more for at least a few years. This allows the tenant to determine whether he or she would pay a reasonable price for operating expenses.

Reinventing a retail space

In a previous blog we posted, we discussed the importance of finding the right retail space for your brick and mortar location. Knowing who your audience is, what their needs are and how your establishment will fit into the commercial makeup of the area are vital to any successful business. Building from those principles, we are now going to consider how a new business can benefit from renovating a space.

Some of the spaces that apply themselves best to being redeveloped for commercial use are shopping centers. It is a fact that many brick and mortar shopping centers have been suffering over the last decade – Sears, Toys R’ Us, K-Mart – but there is still hope for physical locations when they are smartly designed and presented.

Environmental assessments could prove useful to developers

Real estate purchases have numerous moving parts whether they take place here in California or elsewhere. The due diligence portion of the process could take some time, especially when there are questions regarding the amount of work that may be needed to bring a site up to code. Developers often rely on environmental assessments to let them know what they may be in for when purchasing a certain plot of land.

An environmental assessment lets a developer know if the property comes with any environmental issues. The report also explores the potential for long-term adverse effects of those issues even if remediation efforts take place. Moreover, the report will include recommendations regarding mitigation efforts that could resolve the problems with the land.