Retail lease renewals now depend on more than square footage and rent. Curbside pickup, leaner supply chains, and sustainability commitments have reshaped what a location needs to work for a retailer, and these shifts have proven permanent enough that renewal decisions have to account for them. Before you renew a retail lease, it helps to have a clear checklist of what to review, along with an understanding of which market shifts are worth negotiating around.
These trends – along with others – have led to a shift in how retailers approach their lease management and particularly their lease renewal strategy. Let’s take a look.
Pre-Renewal Review Checklist
Before signing a retail lease renewal, review these lease terms against how your business and the space actually operate today:
- Base rent and scheduled escalations for the renewal term
- Percentage rent breakpoint and rate, if applicable, especially where sales patterns have shifted
- CAM/OPEX caps, base year, and expense stop terms in light of cost inflation since the base year was set
- Renewal option deadlines, notice periods, and whether the option must be exercised in writing
- Use clause flexibility, to confirm it still supports curbside pickup, ship from store, or a reduced footprint
- Parking and traffic flow provisions that allow designating a curbside pickup zone without a formal amendment
- Contraction or co-tenancy rights if the space no longer matches the retailer's footprint needs
- Existing green fixtures and infrastructure, and who is responsible for the cost of any sustainability retrofits
- Audit rights language, to confirm the tenant retains the ability to review CAM/OPEX reconciliations during the renewed term
- Current market comparables, to benchmark the renewal rent against current retail rates in the trade area
Market Trends Still Shaping Space Decisions
Curbside Pick Up Calls for Reimagined Storefronts
With many consumers opting for the convenience of curbside pickup, retailers have to consider the long-term logistics of their parking spaces. They know that if their parking lot causes headaches for their customers, those customers will find other places to shop.
Retailers increasingly look for spaces that offer the ability to control two different traffic flows – curbside pick-ups and in-store shoppers. Spaces that offer either a turnkey solution or can easily be retrofitted to separate these two traffic flows will be prioritized as companies consider their lease renewals.
Supply Chain Issues – Will Retail Stores Shrink?
Online shopping had already shifted consumer behavior a great deal before the pandemic and now that supply chain issues add uncertainty, retailers are left to wonder if they need all that square footage. Large retailers were already experimenting with smaller footprints before the pandemic and if they are going to face ongoing uncertainty as to their stock, smaller stores may be the answer. As retailers review their lease management, they will look for spaces that reflect the future of their business and not the past.
Greater Focus on Sustainability
Retailers have become even more cost-conscious over the past few years. With many having already made commitments to sustainability, they are using this time as an opportunity to realize a two-fold commitment. Retailers are looking to realize the cost savings of green initiatives, reaching their sustainability goals along the way. Buildings that already have fixtures and infrastructure in place will become the top choices for retailers as they consider their lease management.
Partner with Scribcor for Strategic Retail Lease Management
Plot your strategy as you guide your business to a new era in the retail sector. Scribcor is here to provide accurate leasing data so that you can make the most informed decisions possible. Reach out today to begin your retail lease management strategy.