Landlords Hedge Against Warehouse Alteration Issues
Dennis Ghan, a partner of Palmieri Tyler's Real Estate Practice Group, was quoted in a May 27th issue of Law360 about landlords becoming increasingly concerned that company-specific property alterations increase their liability and make properties difficult to re-rent or sell. As warehouse technology evolves, landlords are structuring leases with an eye toward minimizing risk, should the lease — or the company — go south.
Ghan said the rapid change of technology does sometimes play in the favor of landlords, though. Sometimes, landlords are happy to keep the improvements, particularly costly refrigeration and freezer additions. Ghan said he’s done deals in which tenants have signed on largely because they were drawn to the improvements on site.
With tenants ranging from startups to behemoths like Amazon.com Inc. seeking to stay ahead of the curve and bring the latest technology into their warehouse facilities, the speed with which technology is evolving and the uncertainty about where it may be heading — think robots zooming around production floors — is causing landlords to seek additional protections against future losses.
"It really does cut both ways, because the technology changes so much," Ghan said.
Landlords do sometimes benefit from tenant improvements. But given the uncertainty of future technology, landlords are realizing they also have a growing number of potential liabilities and are doing what they can to protect themselves.