What do non-economic covenants primarily affect in a commercial lease?

Non-economic covenants in a commercial lease refer to terms and conditions that do not directly relate to financial aspects such as rent or income generation. Instead, they influence the overall utility and desirability of the space for tenants. These covenants may include stipulations regarding the use of the property, maintenance obligations, signage rights, or exclusivity clauses that affect how tenants can operate within the leased space.

By shaping the operational environment and conditions, non-economic covenants play a crucial role in determining the value of the space to tenants. For example, if a lease includes a clause that allows a tenant exclusive rights to operate a certain type of business within a building or a shopping center, it enhances the value of that space to the tenant by reducing competition. Similarly, restrictions on the use of the space can either enhance or diminish its appeal based on the tenant's business needs.

While non-economic covenants may indirectly influence the overall rental rates or even the lease duration, their primary impact remains rooted in how they affect tenant perceptions and value derived from the property. Thus, focusing on the value of the space to tenants accurately captures the essence of what non-economic covenants primarily affect in a commercial lease.