Hunton Retail Law Resource

When developing a retail shopping center, landlords have a vision for what that shopping center will look like. This vision comes to life as the shopping center is leased up and tenants open for business. In order to preserve that vision, and ultimately the marketability of the shopping center, landlords will craft permitted use, prohibited use and exclusive use concepts into their leases to ensure that the shopping center occupants continue to operate in the shopping center throughout the term of their leases in accordance with the landlord’s vision.

Business re-openings, increased hiring, and a fresh batch of stimulus checks have driven a recovery in retail sales during the first half of 2021.  However, the collective sigh of relief that many retailers (and their landlords and lenders) are breathing is not being shared by all.  The recovery is not benefitting every retailer evenly, and some may never recover their pre-pandemic sales as COVID-19 has accelerated trends towards e-commerce and away from larger brick and mortar locations.  Many commercial tenants who were unable to secure rent forgiveness from their landlords still owe rent from April and May 2020, when nearly half of commercial retail rents went unpaid.  As struggling retailers weigh their options, some recent cases involving The Gap, Inc. offer insight into how courts may treat attempts by commercial tenants to break their leases using COVID-19 as justification.

The rise of e-commerce and the struggle many brick-and-mortar retail stores face is nothing new.  Customers are increasingly choosing to shop for clothes, furniture and even groceries from the convenience of their own homes. More recently, however, this shift in the way consumers shop has given rise to new types of retail stores – small showrooms and “pop-up shops.” While showrooms are not entirely new concepts, purely digital companies are increasingly opening up physical showrooms where customers can see and touch merchandise before deciding to buy, while the actual transactions often remain online. Pop-up shops – another retail store model - allow retailers (often online or seasonal retailers) to have a physical presence for a limited duration to essentially test run whether a permanent store would be lucrative.  

Hunton Andrews Kurth restructuring partner J.R. Smith joins the latest installment of Debtwire's Middle Market Podcast to discuss challenges faced by the restaurant industry, particularly the casual dining franchise space.