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Office vs. Retail Leasing: Practical Considerations for the Retail Tenant

BY Julian Freeman
October 02, 2015

Experienced retail tenants are generally well versed in commonly negotiated retail provisions such as those pertaining to exclusive use rights, opening and operating co-tenancies, “go-dark” rights and percentage rent. Do these same concepts apply in the office lease arena? And how do common commercial leasing provisions such as those addressing assignment and subletting, relocation, and reimbursement of operating expenses differ in office leases as compared with those in a typical shopping center lease? Whether a retail tenant is leasing office space for its headquarters, or retail space within an office building or a mixed-use office and retail project, understanding the answers to these questions is critical to negotiating a fair deal with an office landlord.

Before addressing some of the differences, it is important to note that many of the more complicated and frequently negotiated retail leasing provisions are often not applicable in the office leasing context. Some of these provisions include opening and operating co-tenancy requirements, continuous operating covenants, “go-dark” rights, landlord and tenant “kick-out” rights, exclusive use protections (except under limited circumstances, as described herein), percentage rent, minimum business hours, and provisions for payment of promotional and advertising charges.

The retail tenant may be relieved to know that it may not be required to spend time (and money) negotiating many of these types of provisions with an office landlord; provisions that consistently make or break a retail lease for space in a shopping center. That is not to say that office leasing is easy or less sophisticated than retail leasing. Many office leasing concepts that differ from similar concepts in retail leasing may leave the retail tenant scratching its head.

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