Restaurant lease planning for the next big destination, including Wharf D.C.
Anyone who had crossed the 14th Street Bridge recently has undoubtedly noticed all of the construction cranes dotting the skyline. The largest development project in D.C. history is underway. The D.C. Wharf, which has been recently revitalized, reminds us all that D.C. is a riverfront city. This revitalization will create a new destination within the city and numerous opportunities for businesses.
The waterfront and restaurant leases
There will be some great opportunities for restaurants because people simply love dining on the water. And leasing opportunities are already available.
With any commercial lease, a careful review is essential. And with new construction in an area where construction is still ongoing, some planning is important and should not be overlooked.
First off, commercial leases are not the same as residential leases. Residential leases offer far more statutory protections. In commercial leases, it is assumed that businesses are more sophisticated than consumers.
So there is a greater chance of making mistakes that may result in irrevocable consequences.
If you are unclear of complex or convoluted terms in a commercial lease, do not try to figure it out yourself. Go to a competent attorney who regularly deals in commercial leases. Even though it costs money, it will buy you peace of mind in the long run. Encourage your attorney to visit the area and get the lay of the land. It is essential to have a proper understanding of the surroundings because they can affect your business just like anything on your premises.
Commercial leases often last for five years or longer. It is worth taking your time to carefully consider the terms before signing.
Most of these considerations apply to virtually all commercial leases, but in areas of new and ongoing construction they may become incredibly important.
Construction and potential disruptions
First off, consider how potential construction could affect your business. Will there be street closings that may interrupt the flow or volume of business for days or weeks? Will you be compensated for that time? If ingress and egress will be obstructed then will you be compensated appropriately or allowed to leave? With the Wharf, like so many other mixed use developments, the residential portion of a building may be completed at a different time than the storefronts or commercial spaces. How will this affect your business? The effect would likely be substantial since most restaurants will examine their profitability based on their proximity to the number of mouths to feed.
Everyone has a ‘financial pain threshold.’ Once that’s crossed, that’s when business owners have to decide that the sacrifice is no longer worth it. How long will you be able to endure disruption to your business before you want the ability to pull the plug? A lawyer can make sure that line, if crossed, gives you the ability to walk away. This is true for all leases, but especially in “construction areas.”
Will there be construction noise? How loud will it be and for how long? These are some important questions for you or your lawyer to ask.
One of the nice things about commercial leases is that they tend to be very open to negotiation compared to residential leases. Things like escape clauses or conditions subsequent may be inserted so if a business just can’t make money due to construction or whatever else it can get out of the space or otherwise be Compensated.
How new development requires special lease considerations
Restaurants often need significant improvements to spaces to allow kitchens and disposal of waste. New spaces need completely new fitting. It is important to consider whether those improvements will be compensated with rent offsets or abatements.
It is also important to consider whether special services that restaurants need may potentially be disrupted by construction. Or, if the restaurant is opening in a new space, whether they are hooked up and available yet. Buildings may be complete and habitable, but not yet suitable for the particular requirements of running a restaurant.
In commercial leases, rent is not always the only cost. Lessors often have to pay CAM, also known as common area maintenance fees. Lessors may be on the hook for varying amounts of their own repairs. And they may be responsible for tax payments. Careful lease review is essential for estimating the total cost of a lease and for business planning.
The new D.C. Wharf is going to offer tremendous opportunities for restaurants with beautiful views and a terrific atmosphere. But just with renting any space, it is worth doing the work to make sure that your expectations as a business owner are mirrored in the lease. More information about the D.C. Wharf and its attraction is available here: https://www.wharfdc.com/.
About the author
Anthony Coppola is a member at the Alexandria, Va.-based law firm Coppola & Jabaly, which serves small businesses. He has practiced law as an appellate litigator at Greenberg Traurig. He also developed his professional skills working at the Legal Writing Pro, the D.C. Public Defender and the U.S. Department of Labor Office of the Solicitor.
Photo credit: Wharf D.C.