3 Hot Topics in Commercial Real Estate Leasing
1. The “Last-Mile” Warehouse Coming to a Neighborhood Near You Soon:
With the increasing use of e-commerce for the purchase of consumer and business goods, timely delivery expectations have never been higher. Gone are the days in which centralized warehouses in industrial districts are a viable option. In the competitive world of fast delivery, only warehouse locations close to the end-user/customer will suffice. Accordingly, many e-commerce companies (Amazon, Wayfair, etc.) are looking to penetrate neighborhoods and close the loop on the last mile between the company and its customer. Accordingly, e-commerce companies are looking to convert a variety of properties, often in small and often neglected strip malls, to “mini” distribution centers, raising a number of issues for landlords and the communities that control zoning. This discussion will focus on the myriad of leasing and zoning issues arising from the use of neighborhood properties re-purposed as mini-distribution centers.
2. Adaptive Reuse on the Rise
As the U.S. continues its rapid transformation from an economy based on industry and manufacturing to an economy based on technology, information and services, many buildings in the urban environment do not well serve the “new economy” and have become in many cases nearly obsolete. To suggest that a majority of these properties are outdated is an understatement. Through adaptive reuse, many believe these buildings can contribute to a more sustainable and cost-effective development process and benefit society’s desire to reduce traffic congestion and pollution. Adaptive reuse of these buildings can also be used and to make areas more “pedestrian friendly” because of their often ideal locations and proximity to other essential services. Big box stores are being reused as schools, medical centers, libraries, court houses, museums and recreation centers. Strip malls are being redeveloped and re-landscaped to be more pedestrian-oriented and inviting to customers. Warehouses are being retrofitted as business incubator, gallery and event spaces. Locally, one needs to look no further than Dominium’s repurposing of the former Schmidt’s Brewery property on West 7th Street in St. Paul into artist lofts and mixed use property to understand the great potential of adaptive reuse.
3. Who pays for the Tenant Improvements and why it matters.
It’s important to drill down on the details of the payment mechanism for tenant improvement costs. If the Landlord is paying for a majority of the tenant improvement dollars, it doesn’t make sense to have the Tenant pay the contractor, get reimbursed by the Landlord and functionally serve as a short term lender. On the other hand, if the Landlord is only paying a small portion of the tenant improvement costs, then it makes more sense to have the Tenant be the primary payer to the contractor with reimbursements coming from the Landlord, but it’s not always clear. This discussion will focus on leasing situations where this issue has come up.
1.0 Standard MBCLE credit applied for
Speakers: Steven P. Katkov, Member, Cozen O’Connor; and John Saunders, Shareholder & Attorney, Avisen Legal, P.A.
Cost: $20.00 for HCBA members / $50.00 for non-members
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