What Is An Anchor Tenant?
Anchor Tenants And Their Impact On Your Commercial Lease
An Anchor Tenant is the prime tenant within a retail space. They occupy the largest percentage of the commercial spaces’ total square feet. Anchor Tenants help to draw consumer traffic by the mentioning of their name alone. An Anchor Tenant can also be referred to as a prime tenant, or a draw tenant. They are the main attraction, the leading big business that attracts customers and other companies to the development space. The Anchor Tenant typically pays less in rent than any of the other tenants in the space. In addition, they are generally located at the ends of the retail spaces.
How Will Anchor Tenants Affect Your Business?
An Anchor Tenant tends to positively influence the surrounding businesses. In addition, they have a positive influence on the area in which the development is built. They help to stabilize cash flow, draw in other tenants, and put the space on the map. In other words, they bring credibility to the property. This results in occupancy rates seeing an increase. The reasoning being that other tenants want to be close to the foot traffic that the anchor tenant brings. People who are browsing will likely stick around longer and make more purchases if they don’t have to leave to fill their grumbling tummy. It is a win-win situation for everyone. Anchor Tenants can positively impact the Mom & Pop shops and help them establish credibility while also helping the landlord fill any vacancies and increase the landlords’ profits.
There is also the risk that the anchor tenant leaves, insert loud gasp, which could result in a disastrous domino effect for the other tenants. This will without a doubt negatively impact the surrounding businesses who depend on the foot traffic from the Anchor Tenant to keep their businesses seeing green and not red. There is the need for commercial tenants to negotiate for the inclusion of a “co-tenancy clause” in their lease. This will enable the secondary tenants to have some level of reprieve should the Anchor Tenant leave. An example would be that the secondary tenant will see a reduction in the rent paid until a new Anchor Tenant replaces the former.
Retail Anchor Tenants
Back in the late 1990’s & early 2000’s the popularity of super malls was in their prime. Families would gather up their kids and drive to the closest mall to make a day out of shopping thru multi-level retail spaces. Anchor Tenants have every product under the sun, making them a one stop shop for all to enjoy. Anchor Tenants would be the main driver of these successful malls. Food courts with amenities such as small rides, or waterparks, they served their purpose of free entertainment for all. Elders would come to the mall early to get their steps in, often dubbed “mall walkers” then occupy space at the nearest coffee shop before the crowds came out in droves. Teenagers would often loiter the mall to the extent of becoming “mallrats”. Trying on all the testers at the beauty shops. Malls were the place to be after school or work, but the good times don’t last forever.
Throughout the past decade we have witnessed the demise of what were once successful Anchor Tenants. Tenants such as SEARS, EATONS, WOODWARDS, etc. But now-a-days the landscape of malls and retail spaces have regressed. Historically, we’ve witnessed the introduction of arcades, movie theatres, fountains, and waterparks. Essentially places were an individual or a family could get out of the house. The spaces would attract consumers to spend their hard-earned money in that one space. In present times, this is not the case.
Office Space Anchor Tenants
A well-established business is associated with popularity, prestige, and wealth. Skyscrapers often advertise international companies’ names or logos front and center on their buildings, creating a landmark rather than just an address on a map. Many smaller companies enjoy having an association with well-known business names even when their business’s activities have no relation. They are guilty by association. Many smaller businesses in these spaces gain attentions simply by being in the area. People are drawn to spaces with more options. New office spaces sometimes include areas for their staff, lounge areas with live plant walls. Some have gyms and showers. Kitchens are outfitted with the latest espresso machines and can even go so far as to install a Keg Machine for after work hour enjoyment. Anchor Tenants can brag about how they treat their employees well which also assists them in attracting talented staff to be employed by them.
What Does The Future Look Like For Anchor Tenants?
With the internet influencing the way we do business, as well as how product physically arrives to the consumer is drastically different. Looking back on the last 5 years, giant names like AMAZON have influenced the decline of consumers to these retail spaces. It’s unfortunate but it is the reality. To be able to order something with the click of a button, you can get what you need sometimes within the same day you ordered it. Making the need to leave the house, non-existent. These tenants are often shutting their doors and even whole malls are closing. Some spaces may find revitalization as future distribution centers.
Mixed use developments are also gaining popularity, with commercial spaces on the ground floor, such as nail salons, a burger joint, pharmacy, and yoga studio but will also be the home to a multistory residential tower above.
We are seeing a trend of implementing public spaces, encouraging consumers to take a load of and relax while admiring a 50-foot cascading waterfall. Some spaces are using Gyms as Anchor Tenants, and those who use those spaces typically leave the gym feeling a little peckish. Then find themselves frequenting the restaurant or microbrewery attached. Some spaces are becoming health clinics
The possibilities are endless and will continue to evolve as humans do too.
How Can We Help?
It is hard to be able to negotiate a beneficial lease for yourself and your business, when anchor tenants tend to have so much more say. If you need help with reviewing your lease or negotiating better terms for your lease, Kahane Law Office can help. Please reach out to one of our experienced corporate lawyers here or call us at 403-225-8810.