Co-tenancies and Mixed-Use Madness

There are myriad issues that must be addressed when leasing space within a mixed-use development that differ from the standard issues that are of concern when leasing space within retail centers such as enclosed mall shopping centers. For example, the allocation of common-area maintenance costs is vastly different, as you need to allocate costs among the retail, office and residential components of the mixed-use development and/or the different ownership interests that may exist between the retail, office and residential components of the mixed-use development. This article focuses only on one difference.

One such issue that has not garnered much attention is whether or not the residential component of mixed-use developments should somehow be made a part of what would otherwise be a traditional co-tenancy requirement for which retailers often bargain. I would argue, and I do not think many retailers would disagree, that the lure of being a retailer in a mixed-use development is the built-in foot traffic that the residents of the residential component offer the retailers. A recent study found that office workers who both live and work in a mixed-use development spent an average of $793.90 on typical purchases around the office during the workweek (including transportation costs, online purchases, full-service restaurant and fast food purchases, and purchases for goods and services).