News & Resources

By Amy C. Serafino

The rise of e-commerce has undeniably transformed the retail industry, but contrary to early predictions, it has not made physical stores obsolete. Instead, the continued growth of online shopping has pushed both traditional and digital-first retailers to rethink their physical presence, ushering in a new, hybrid era of retail that has significant implications for commercial real estate.  

Over the past several years, and particularly since the COVID-19 pandemic, commercial landlords, developers, and tenants have had to adjust to the evolving expectations of consumers. In many cases, those adjustments have included a renewed emphasis on flexibility, location strategy, and the logistics of last-mile fulfillment.  

The Emergence of Hybrid Retail Models  

In response to shifting consumer habits, many traditional retailers have adapted by implementing services such as curbside pickup, buy-online-pickup-in-store (BOPIS), and same-day delivery from store locations. These services, which experienced rapid growth during the pandemic, continue to thrive and are now considered standard for many major retailers.  

At the same time, many e-commerce-native companies are moving in the opposite direction, from clicks to bricks. Brands that launched online, such as Warby Parker, Allbirds, and Amazon (through Amazon Go and Amazon Style), are increasingly opening physical storefronts to improve customer experience and manage returns more efficiently. These companies are discovering that physical locations continue to play a crucial role in customer acquisition, brand loyalty, and logistics.  

What This Means for Commercial Real Estate  

The new reality is apparent: e-commerce and brick-and-mortar retail are no longer competing models; they are complementary components of a comprehensive retail strategy. This shift is driving demand for flexible retail spaces that can support omnichannel operations, as well as for distribution and fulfillment centers positioned to deliver goods quickly in high-density areas.  

In urban markets such as Washington, D.C., this evolution has led to increased interest in mixed-use and street-level retail spaces, particularly those that offer direct access, efficient parking, and adaptability for fulfillment purposes. Properties that can accommodate drive-thru lanes, customer pickup areas, or small-format showrooms are becoming more desirable to both landlords and tenants.  

Additionally, industrial and logistics properties near urban centers are experiencing a surge in demand as retailers strive to reduce delivery times. This shift has sparked the repurposing of underutilized retail properties, such as vacant big-box stores, into micro-fulfillment centers or “dark stores” used solely for online order fulfillment.  

Legal Considerations in Lease Negotiation and Site Selection  

These trends present both opportunities and challenges from a legal standpoint. Retail leases must now reflect a broader range of possible uses and anticipate operational shifts as retailers refine their omnichannel strategies.   

From a commercial real estate attorney’s perspective, several key considerations arise:  

• Use Provisions: Leases should allow for non-traditional operations, such as curbside pickup, partial warehousing, or pop-up activations, in addition to standard retail activity, though from a landlord perspective, before doing so, any existing leases in shared retail centers should be reviewed to confirm that allowing such non-traditional uses do not result in a landlord default.    

• Exclusive Use and Co-Tenancy Clauses: Retailers that once relied on foot traffic and synergistic neighbors may now focus more on digital sales and fulfillment capabilities. These changes may warrant reevaluation of co-tenancy protections and use restrictions.  

• Common Area and Access Issues: As shared spaces, such as loading zones and parking lots, become integral to logistics, it is essential to allocate rights and responsibilities for these areas in commercial lease agreements.  

• Zoning and Permitting: Retailers repurposing spaces for partial or full-time logistics operations must be cautious about local zoning laws, particularly in areas adjacent to residential zones. Not all municipalities are prepared for or receptive to these hybrid uses.  

Washington, D.C. Market Outlook  

In Washington D.C., the retail sector continues to show resilience, particularly in walkable, mixed-use neighborhoods such as Dupont Circle, Georgetown, and the H Street corridor. Landlords and tenants are increasingly prioritizing adaptable spaces and creating innovative leasing structures. Ground-floor retail in multifamily buildings, especially when paired with strong transit access, remains a popular and productive asset class.  

Simultaneously, areas like Ivy City and Brentwood are attracting attention for logistics and last-mile fulfillment uses. The city’s central location and dense population make it a prime market for rapid delivery, and demand for urban infill industrial space is likely to increase as consumer expectations for speed and convenience grow.  

Conclusion  

While e-commerce once appeared to threaten the future of brick-and-mortar retail, it has instead revealed its continued importance, albeit in a new and evolving form. Today’s physical stores serve not only as sales points but also as fulfillment hubs, return centers, and brand experience touchpoints.  

For commercial real estate professionals, adapting to this shift means recognizing the dual role of retail spaces in the modern economy and drafting leases and deal structures that anticipate future flexibility. Whether advising a landlord on lease amendments or counseling a tenant on site selection, understanding the intersection of e-commerce and physical retail is now an essential part of the real estate legal landscape. 

Amy C. Serafino is a commercial real estate attorney in Washington, D.C. For more information, contact aserafino@fmlaw.com.  

The content on this blog is for informational purposes only and does not constitute legal advice. The information provided should not be relied upon as a substitute for professional legal counsel.