Hunton Retail Law Resource

For decades, radius restrictions have been a staple of retail leasing. Traditionally, these provisions have served two related purposes. Shopping center landlords often require tenants to refrain from operating another store within a specified geographic area in order to protect sales and traffic at the leased location. At the same time, retail tenants frequently negotiate their own radius protections, limiting a landlord’s ability to lease nearby shopping centers to direct competitors or to permit uses that could undermine the tenant’s market position.

In a retail environment dominated by brick-and-mortar stores, these restrictions were relatively straightforward. A retailer either did or did not operate a competing store within the restricted area. Likewise, a landlord either had or had not leased space to a prohibited competitor. Today’s omnichannel retail landscape, however, has blurred those lines.

Consumers increasingly move between websites, mobile apps, physical stores, curbside pickup locations and same-day delivery services without distinguishing among them. Retailers have responded by developing sophisticated fulfillment networks that include dark stores, micro-fulfillment centers and third-party logistics providers.

As a result, questions that once seemed simple are becoming more difficult to answer. If a retailer operates a dark store within a restricted radius, has it violated its lease’s radius restriction? What if the facility is closed to the public and serves only online orders? Does a micro-fulfillment center constitute a “store” if customers never enter the premises? If inventory is distributed through a nearby third-party delivery partner, is that location functionally competing with the leased premises?

The same uncertainty applies to tenant-side radius restrictions. Consider a retailer with exclusive rights intended to prevent a landlord from introducing a competing use nearby. Does an online-only retailer operating from a fulfillment center count as a competitor? What about a retailer primarily conducting sales through mobile applications while using a small physical footprint for pickup and returns? Lease provisions drafted years ago may not clearly address these evolving business models.

Curbside pickup further complicates the analysis. A customer may place an order online, receive confirmation through an app, and collect merchandise without ever stepping inside a store. Although the transaction originates digitally, the physical location remains a critical part of the sales process. Determining whether a particular facility functions as a store, a warehouse, or something in between is often no longer a simple exercise.

These questions have significant economic consequences. Radius restrictions and exclusive-use provisions frequently carry substantial remedies, including rent adjustments, loss of exclusivity protections, injunctive relief or even lease termination rights for more egregious violations.

Ambiguous language can therefore create meaningful disputes between landlords and tenants as retail operations continue to evolve.

The underlying business objectives behind radius restrictions remain as relevant as ever. Landlords want tenants to drive traffic and sales from designated locations, while tenants seek protection against nearby competition that could erode market share. The challenge is that the definitions developed for a brick-and-mortar world may not adequately address today’s integrated retail ecosystem.

As omnichannel retailing continues to expand, landlords and tenants should consider revisiting traditional radius restrictions and exclusive-use provisions. Rather than focusing exclusively on the concept of a “store,” modern lease drafting may need to address fulfillment centers, dark stores, pickup locations, delivery hubs, and other hybrid operations expressly. In the omnichannel era, the real question is no longer where a retailer is selling goods, but how those sales are being made. That distinction may determine whether traditional radius restrictions continue to serve their intended purpose.