The Shopping Center Lawyer

Re-Imagining the Shopping Center Post-COVID: Zoning Changes Needed to Accommodate Store Features No Longer Deemed Convenience Amenities

By: Ted Zangari and Kevin J. Moore

Curbside pick-up lanes and “to-go” parking spaces—already trending in shopping centers before the pandemic—have become essential features of retail stores in the wake of COVID-19 and are likely to become permanent fixtures in shopping centers. Likewise, drive-throughs and walk-up or vestibule kiosks will no longer be limited to banks and pharmacies, as retailers of every type seek to adapt to the new public health normal and avoid risks and exposures to employees and customers alike. How does this sudden shift in shopping center design and layout square with existing zoning laws and municipal codes around the Garden State?

Rent Obligations on Retail Space in the Midst of a Pandemic: A Path Forward for Landlords and Tenants

By: Ted Zangari

Download Rent Obligations on Retail Space in the Midst of a Pandemic A Path Forward for Landlords and Tenants

Going Dark: Land Use Implications of Converting Retail Space to “Dark Stores” for Fulfilling Online Orders

By: Adam J. Faiella

In recent years, retailers have begun to convert unused space in their stores, including the sales floor area, to warehouse and distribution operations for online orders as e-commerce has increased. This trend has accelerated in response to the surge of home deliveries during the COVID-19 pandemic, and many retailers are utilizing even more floor area, and sometimes entire stores, as fulfillment centers. Re-purposing vacant or unused space can aid brick and mortar retailers in competing with pure-play online merchants and help property owners prevent lease defaults and maintain healthy occupancy levels. Municipalities also benefit when the rent roll of a commercial tax ratable of any kind, especially a shopping center, is stabilized. However, retailers and their landlords need to proceed carefully because converting unused retail space to “dark stores” for warehouse and distribution could have land use implications.*

Why Supermarkets Are Building 'Dark Stores'

By: Ted Zangari

Retailers are reportedly creating “dark stores” within their retail premises for use as fulfillment centers—raising a host of interesting questions:  At what point does such activity become a warehouse/distribution use that’s in conflict within local zoning ordinances?  Does such activity violate one or more of the prohibited use (“dirty dozen”) restrictions typically found in shopping center leases?  Will delivery trucks and vans stress the parking lot and internal roadways?  If such activity extends beyond normal shopping center hours, who pays for lighting, security, etc.?  If the tenant has agreed to pay percentage rent to its landlord based on sales made in the store, should goods delivered from the premises be included in sales?

If this was a temporary phenomenon in response to the current pandemic, it wouldn’t be news—what’s newsworthy is that the construction of automated “mini-warehouses” and “micro-fulfillment centers" inside stores appears to be a permanent trend.

> Click here to read "Why supermarkets are building 'dark stores'" from 
CNN Business

U.S. Retailers Plan to Stop Paying Rent to Offset Virus

By: Ted Zangari

Every businessperson will soon be tossing around the phrase “force majeure”— none more so than tenants, especially retailer-tenants. The waterfall on rent relief has only just begun and will intensify in the run-up to the April 1 due date for next rent payments. Tenants are already pressing landlords; landlords, in turn, are pressing their mortgage lenders; and tenants, landlords and mortgage lenders together will all be pressing insurance companies to lift their policy exclusions for pandemics and viruses. Unless Congress steps in, chaos and a cascading series of defaults will take place. It doesn’t have to be this way. Former Trump Administration economic advisor Gary Cohn has a brilliant proposal: allow landlords to write-down 2020 rent losses on their 2019 tax returns. (The same write-down could instead be accorded to any of the other parties in this four-ring circus.)

> Click here to read "U.S. Retailers Plan to Stop Paying Rent to Offset Virus" from Bloomberg

Curbside Enthusiasm: Retailers Adapt In A Time Of Crisis

By: Ted Zangari

Curbside pickups, already trending in shopping centers before the pandemic, will likely become a permanent feature of retail stores...along with features long associated with bank branches: automated kiosks (ATMs), dividers between customers and clerks (tellers), and drive-throughs. As with the advent of mini-fulfillment centers within stores (see my earlier post), these operational and design changes will trigger all sorts of lease, building code and land use issues. Landlords, tenants and their host municipalities have no choice but to get this right; e-commerce may have created a competitive threat the past two decades, but COVID-19 poses an existential threat to all parties. When it comes time to swing open the doors, don’t just re-open— RE-IMAGINE.

> Click here to read "Curbside Enthusiasm: Retailers Adapt In A Time Of Crisis" from Forbes

Nordstrom Enters Used-Clothes Business

By: Ted Zangari

Yesterday’s announcement that Nordstrom is getting into the used-clothes business got me thinking again about the rapid evolution of retail and how so many of the “prohibited uses” in store leases of yesteryear are now embraced by landlords and fellow retailers, yet those uses remain off-limits because of “dirty dozen” restrictions in existing leases. Even worse, many leasing professionals (attorneys included) have failed to update their prohibited use exhibits; they are still using the same exhibits from the 1990s in new leases—in the process, further preventing evolving and new retail concepts from coming into many centers.  An easy and by now well-known example is the “massage parlor” prohibition preventing the operation of a Massage Envy.  “Used” or “second-hand” apparel stores have also been a dirty-dozen favorite...but now we have the venerable Nordstrom getting into that business.  So it’s important to consider what’s next.  Tesla is already selling cars from showrooms, but most prohibited use lists ban ”car dealerships”—primarily to prevent a car lot out front, not because of the showroom—so this prohibition also needs tweaking.  What’s next?

> Click here to read "Nordstrom Enters Used-Clothes Business" in
The Star-Ledger

Legislation to Create a New Class of Restaurant Liquor Permits Clears a Big Hurdle

Assembly Bill 3494 was approved last week, with amendments, by the Assembly Appropriations Committee. The bill now heads for a vote in the full General Assembly. The State Senate is expected to take up the legislation early next year.

> Click here for a summary of the most-up-to-date version of the legislation

Liquor licenses in New Jersey Cost $350K and It's Crippling the State's Dining Scene

As seen on: northjersey.com
By: Nicholas Pugliese and Esther Davidowitz 

Peter Loria still recalls with disappointment the time he tried to open a restaurant in the Bergen County village of Ridgewood.

He poured a chunk of his retirement savings into what he thought would become a destination for New Jersey food lovers, but he hit a common roadblock...

Link to full article

Restaurants Join Together to Support Liquor License Reform

A newly formed advocacy group, BYOB New Jersey,represents a group of small business owners across the Garden State who have organized to fix the broken liquor license law in New Jersey. Local small restaurants are magnets for economic development, and BYOB New Jersey is fighting to allow neighborhood restaurants the opportunity to have local liquor permitting for table service. Specifically, the group is supporting passage of A-3494, Assemblyman John Burzichelli’s bill which creates two new classes of local liquor permits for restaurants: R-1 for wine, beer, and spirits; and R-2 just for beer and wine. No bar service would be permitted, and alcohol would only be served at the table with a meal. NAIOP NJ supports A-3494 as an important first step in reforming NJ’s antiquated liquor license laws in support of redevelopment.