Mall landlords are tightening screws on non-anchor tenants

Los Angeles /
Jul.July 06, 2018 10:00 AM
(Credit: Wikimedia Commons)

The exodus of anchor tenants from America’s malls has landlords rethinking a lease clause that is popular with smaller tenants.

Owners have traditionally granted smaller tenants co-tenancy clauses, allowing the businesses to exit a lease if a major anchor store like Macy’s or J.C. Penney departs the mall. But that may be changing.

The steady exodus of anchor tenants at malls nationwide in recent years has landlords pushing to eliminate those clauses to stop the bleeding, according to Bloomberg.

The co-tenancy clauses were historically a low-risk for landlords and provided smaller tenants with an out should the larger stores go bust. But with the continued rise of e-commerce, American malls have been decimated. In Chicago, anchor space vacancies are at all-time highs.

Eliminating the clauses also comes with potential pitfalls. It could make existing tenants hesitant to renew a lease and potential tenants think twice about signing one, according to Kent Percy, a managing director at the New York-based consulting firm AlixPartners.

“[Landlords] could lose the whole inside of the mall” if they refuse to sign co-tenancy clauses, he said.

Tenants also have some leverage in the down market. The need for tenants can give them room to negotiate shorter leases and lower rents. They could also sign co-tenancy leases for only certain anchor tenants, which may be more amenable to landlords provided those anchors are in good financial shape, according to Bloomberg. [Bloomberg] — Dennis Lynch 


Related Articles

arrow_forward_ios
Granite CEO Michael Dardick and Industrious CEO Jamie Hodari

Industrious partners with landlords to offer tenants satellite workplaces

Industrious partners with landlords to offer tenants satellite workplaces
Colorado Campus at 2041-2115 Colorado Avenue and Northwestern Mutual CEO John E. Schlifske

Northwestern Mutual picks up Santa Monica office campus for $166M

Northwestern Mutual picks up Santa Monica office campus for $166M
Prop 15 property tax measure draws millions (Credit: iStock)

Prop 15 property tax measure draws millions of dollars from for and against campaigns

Prop 15 property tax measure draws millions of dollars from for and against campaigns
Los Angeles County plans to clear several businesses to reopen over the next 10 days

Malls, nail salons, other LA businesses to open in next 10 days

Malls, nail salons, other LA businesses to open in next 10 days
Gap sues mall REIT Haagen Company to void its lease at Village at Century. (Credit: iStock)

The Gap sues Inglewood mall owner, seeking to void lease

The Gap sues Inglewood mall owner, seeking to void lease
California is allowing barbershops and salons to reopen under new coronavirus mitigation guidelines (Credit: Noam Galai/Getty Images)

California allows barbershops to reopen, but LA holds back

California allows barbershops to reopen, but LA holds back
LA County assessor Jeffrey Prang

LA County properties valued at nearly $2 trillion…before pandemic

LA County properties valued at nearly $2 trillion…before pandemic
Carson Mayor Albert Robles and a rendering of the proposed project (Credit: The city of Carson)

Simon-Macerich mall project in Carson sparks latest legal claim

Simon-Macerich mall project in Carson sparks latest legal claim
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...