Leasing restaurant or café space in an office building requires certain considerations that a restaurant tenant may not encounter if it typically leases space in traditional retail settings. It is also important to realize that the office lease form that may be presented by an office landlord is likely not tailored to retail uses. In that vein, this article highlights five key provisions for a restaurant tenant to consider when negotiating a lease for premises within an office building.

1.  Approval Rights of Large Tenants in the Office Building

As is the case in traditional retail settings, a landlord of an office building may extend unique rights to its larger office tenants. One such right may allow a tenant to approve a change in the use or operations of a restaurant or cafe serving the building. A restaurant tenant should be aware of any such existing rights, which may come in two forms: (i) the right of an anchor tenant to approve a transfer of the restaurant lease through an assignment or sublet of such lease, and/or (ii) the right of an anchor tenant to approve a change in the use or trade name of the restaurant premises.

2.  Exclusive Rights of Restaurant Tenant

The concept of exclusive use protection is nothing new to restaurant tenants, and such rights should not be forgotten when negotiating a lease within an office building. As always, broader is better (for the tenant), and a restaurant tenant may consider asking for the exclusive right to operate any restaurant within the office building. In the event that the office building is one in a group of buildings owned by entities that are affiliated or under common control, a restaurant tenant may negotiate the exclusive right to operate a restaurant in the buildings under common ownership within a certain radius or within an office complex.

3.  Use of the Common Areas

In addition to exclusive restaurant rights negotiated by restaurants tenants, such tenants should also negotiate limits upon the landlord’s use of certain common areas of the building which are proximate to the restaurant premises. For example, restaurant tenants should negotiate the right to use patios or outdoor areas adjacent to their premises. Additionally, building lobbies offer an opportunity for office landlords to lease or temporarily license smaller spaces to vendors in a kiosk-type setting. Restaurant tenants should attempt to limit kiosks and pop-up restaurants that would compete with the restaurant by operating in the common areas on a regular basis. A reasonable and common concession by a restaurant tenant would allow a landlord to use the common areas in a competing manner only for special events or on an incidental basis. For example, during the winter holidays, a landlord or its building operator may organize holiday treats in the building lobby for all tenants to enjoy. Nobody likes a Grinch!

4.  Consider the Core Factor

A restaurant tenant leasing premises in an office building should ensure that the building core factor is not applicable to its premises. A core factor is used in office building leases to pass-through to office tenants the costs of operating expenses for the common areas of the building, but the restaurant tenant does not use the common areas as a traditional office tenant does. For example, core factor will consider the costs associated with maintaining the elevator lobbies and restrooms of multi-tenant floors of the building – a concern not applicable to a ground level restaurant tenant. Thus, a restaurant tenant should consider the core factor and negotiate its removal from the landlord’s determination of the restaurant tenant’s share of common area maintenance expenses.

5.  Importance of Utilities

Restaurant tenants rely on utilities in a manner unlike most office tenants, and a typical office lease form likely does not contain the terms and conditions necessary for a restaurant tenant when it comes to utilities. For example, a restaurant tenant should negotiate terms related to the installation, maintenance, and repair of grease traps and scrubber systems, as applicable. Additionally, in the event that utilities are cut off or made unavailable to the office building, a restaurant tenant is affected differently than an office tenant. It’s not practical to work remotely from home if you’re a restaurant! Thus, the tenant should negotiate the abatement of rent and/or a termination right for the tenant in the event that the provision of utilities is interrupted for a prolonged period of time.

The above are just a few important considerations for restaurant tenants that have the exciting opportunity to lease space in an office building full of workers hungry for convenient dining options.

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Don’t Get Burned: Five Considerations When Leasing Restaurant Space in an Office Building