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Online returns are wreaking havoc on retail leases

On Behalf of | May 8, 2018 | Commercial Real Estate |

Without a doubt, the way that people shop has changed dramatically over the last decade or so. California residents can buy products from anywhere in the country and have it shipped to their doors. This has caused brick and mortar retail stores to make significant changes in the way they operate. In fact, some have even had to close their doors, at least in some locations, because they simply cannot keep up with the changes.

Matters become even more complicated when the anchor tenants are the ones that leave. Mall and shopping center owners have had to make adjustments as well. Even so, new challenges continue to crop up over time.

Recently, online returns have become an issue for many retail landlords. Customers can purchase items online and return them to the brick and mortar store. This seems to affect the bottom line when it comes to rental payments.

In many shopping centers, the landlord gets a portion of the tenants’ sales as part of the lease agreement. When returns drag those numbers down, it affects the rents the property owner collects. At least some sources are saying that this may need to be addressed in the commercial leases signed by tenants.

This may be something for retail shopping center and mall owners here in California to consider as well. When it comes time to renew certain leases, or when a new tenant comes in, it may be a good idea to consider the impact that online shopping and returns will have on the terms of the lease. It may require some assistance to determine how best to make that happen and to understand the legal and business options available.

Source:, “Internet returns a worry for malls“, Sarah Mulholland, May 2, 2018