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What can the right anchor tenant do for your new business?

On Behalf of | Mar 29, 2022 | Commercial Real Estate |

If you’re a new business owner looking for commercial space to lease, one of the factors you may consider as you’re looking at office complexes or other developments is the anchor tenant. This is typically a well-known business, like a major department store, movie theater, bank, investment company or grocery store. Some larger developments have several anchor tenants.

You likely want a nearby anchor tenant that draws people to the complex or neighborhood but does not take away any business from you. That’s usually not a problem because anchor tenants typically have negotiated the right to prevent businesses whom they’d consider competition from leasing space in the same development.

Anchor tenants aren’t what they used to be

The idea of what makes a good anchor tenant is evolving. Shoppers don’t flock to big-name department stores like Dillard’s the way they used to when they can buy their products online. However, Apple Stores are increasingly successful anchor tenants. Similarly, many people never visit a bank any more, but may go to the gym at least several days a week. 

Ideally, you want an anchor tenant that attracts your customer base, but for different reasons. Many people like to get multiple errands taken care of at once. If you have a product or service not offered by anyone in a complex that visitors want or need, you’re more likely to find success.

Why you may want a co-tenancy clause

Often, when an anchor tenant’s presence is vital for another business’s success, owners will negotiate a co-tenancy clause in their commercial lease. These are especially common in shopping centers. 

A co-tenancy clause typically allows tenants to re-negotiate their rent if an anchor tenant leaves. However, the landlord may have their own requirements – for example, that you demonstrate a drop in sales or other business for a specified period after the anchor tenant leaves before the clause can be invoked.

Anchor tenants are just one of many factors that you may need to consider carefully as you negotiate a commercial lease. Even if you’re a start-up, don’t assume that you don’t have any leverage. With experienced legal guidance, you can seek the terms that will give you the best chance of success.