By Fernando Landa, Partner
Parking has long been a critical aspect of the shopping center experience, influencing consumer behavior, tenant satisfaction, and overall profitability. Parking allocation can be a contentious issue among tenants within shopping centers, particularly when space is limited or unevenly distributed. As shopping habits evolve, new challenges emerge for landlords and tenants to navigate in shopping center parking areas. Below are some best practices to address emerging parking issues.
1. Changing Tenant Mix Considerations
Not long ago, movie theaters, gyms, and other tenants with high parking requirements fell out of favor with shopping center landlords because other tenants demanded assurances of adequate parking. However, as many retail sales have moved online, these tenants that use more parking spaces are now a major draw for customers, and more customers visiting a shopping center benefits all of its tenants.
While a landlord may want to lease space to a movie theater, gym, or other high-volume user, many shopping center leases prohibit such tenants or put restrictions on such users. For example, a fitness tenant's lease may prohibit a landlord from leasing space to another fitness tenant or may limit the floor area – and therefore overall capacity – of a gym or other high-parking user. Similarly, CC&Rs and REAs will often place restrictions on high-parking users.
2. The Draw of Green Technology
The federal government, many state governments, and private industry are all investing billions of dollars in building out America's "green" infrastructure. Shopping center parking fields have been the target of such investments as these parking areas can accommodate a large concentration of electric vehicle charging stations, and solar panels can be installed on parking structure roofs and other covered parking areas.
While shopping center owners can capitalize their parking spaces by installing green technology, CC&Rs, REAs, and leases must all be reviewed to ensure that the installation of such infrastructure does not trigger a default thereunder because of the reduction of spaces for customer use. Similarly, leases should be reviewed to see how infrastructure installation costs and revenue derived from charging stations should be accounted for under common area expense provisions.
3. Ride Sharing and Food Delivery Services
The rise of ride-sharing services and food delivery services has implications for parking demand within shopping centers. Landlords should consider accommodating these trends by designating pick-up and drop-off zones for ride-sharing services and food delivery services. Some restaurant tenants are now demanding short-term parking be located near their spaces. Before implementing such changes, recorded encumbrances and leases should be reviewed to ensure the shopping center remains in compliance with such agreements.
4. Parking Technology Integration
Advancements in technology have revolutionized the way parking is managed and utilized within shopping centers. From mobile apps that enable convenient payment and reservation systems to sensors that monitor parking space availability in real-time, integrating technology can enhance the efficiency and effectiveness of parking operations.
Prior to installing such technology, landlords should review leases, CC&Rs, and REAs to create a roadmap for the approval and installation of this technology and to confirm whether any of the cost of such installation can be recovered from third parties.
5. Accessibility Compliance and Risk Management in this New Environment
While landlords reimagine their shopping center parking areas to accommodate retail trends, they should also remain vigilant to traditional parking area concerns. For example, any changes to the parking area should be made in strict compliance with the Americans with Disabilities Act (ADA) and other accessibility laws, especially as accessibility claims against landlords continue to rise. Similarly, reimagined shopping center parking fields should seek to minimize accidents – everything from slip-and-fall to vehicle collisions – that can result in costly litigation and reputational damage. Landlords should implement traditional risk management strategies, such as regular maintenance, adequate lighting, and security measures, to minimize legal liabilities.
6. Future-Proofing Parking Solutions
Recent history has shown that consumer preferences and technology can evolve quickly, while CC&Rs, REAs, and leases often feel archaic and limit shopping center owners' ability to adapt to these changes. When addressing current issues such as the installation of green technology, shopping center owners should work operational flexibility into CC&Rs, REAs, and leases to allow them to remain competitive and relevant in the evolving marketplace. For example, shopping center leases should anticipate the installation of smart parking infrastructure and the implementation of dynamic pricing models or explore mixed-use development opportunities to maximize parking efficiency and revenue generation. By proactively anticipating future trends and challenges, landlords can future-proof their parking solutions and ensure long-term success.
In summary, evolving parking issues present both challenges and opportunities for shopping center owners. By leveraging technology, balancing tenant parking rights, and embracing evolving retail trends, landlords can optimize the parking experience for all stakeholders.