At the beginning of 2020, it appeared that commercial landlords and developers had come up with a solution for what to do with long-failing shopping centers located in urban areas. A shift to pop-up restaurants and small storefronts seemed to breathe new life into a languishing sector. Then the pandemic hit, and everything was upended once again.
One of the few bright spots in retail over the recent tumultuous months has been the rise in e-commerce. The demand by consumers for fast, free delivery have created a need for more last-mile delivery centers. Unlike large warehouses designed to serve the needs of a broad region, last-mile delivery centers are typically smaller and located closer to urban centers. Forlorn shopping centers could help meet these needs. However, pivoting to a last-mile delivery center could pose legal challenges for commercial property owners.
A last-mile delivery center may not resemble a warehouse or a distribution center in the traditional sense of the term. However, it could still fall into that category when it comes to zoning. There may be neighborhood concerns about truck traffic and overnight noise that don’t come with a typical retail operation.
Objections from existing retail tenants
Landlords may still have successful retail tenants. They might object to a shift to using vacant space in a way that they had not anticipated. This could be particularly problematic for big-box retailers or anchor tenants who may view e-commerce companies as their direct competition. Many anchor tenant leases prohibit use of space by a competitor.
Objections from potential last-mile tenants
Most shopping center leases require the tenants to pay the costs of maintaining common areas. A company that doesn’t rely on a traditional customer base may have no interest in covering these costs. Landlords may need to adjust the terms of the lease to better fit the needs of a last-mile delivery center.
Shifting former retail spaces to last-mile delivery centers could be a profitable move for many commercial property owners. However, as always, legal concerns should be carefully considered before moving forward. You should discuss your options with a skilled professional.