Mall landlords are tightening screws on non-anchor tenants

Amid the American mall's decline, owners want to eliminate clauses allowing smaller tenants to ditch a lease if an anchor exits

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
From left: Related California’s Gino Canori and William Witte with 710 Broadway (710 Broadway, Getty, Related)
Related scores $385M in financing for Santa Monica mixed-use project
Related scores $385M in financing for Santa Monica mixed-use project
Onni Group’s Rossano De Cotiis and Wilshire Courtyard at 5700-5750 Wilshire Boulevard in Los Angeles
Onni leases 225K sf of offices in Mid-Wilshire to Sony Pictures
Onni leases 225K sf of offices in Mid-Wilshire to Sony Pictures
Simon Property Group's David Simon, Brea Mall at 1065 Brea Mall (Getty, Google Maps, Simon Property Group)
Simon seeks to redevelop former Sears site at Brea Mall
Simon seeks to redevelop former Sears site at Brea Mall
CBRE's Stew Weston with rendering of 1011 North Sycamore Avenue
CIM to build offices on West Hollywood cement plant site
CIM to build offices on West Hollywood cement plant site
Bed, Bath & Beyond's Sue Gove with 14351 Hindry Avenue
Bed Bath & Beyond to close seven more stores across SoCal
Bed Bath & Beyond to close seven more stores across SoCal
Griffin Living's Paul Griffin III and Griffin Plaza at 3885-3977 Cochran Street in Simi Valley
Griffin Living sells Simi Valley shopping center for $22M
Griffin Living sells Simi Valley shopping center for $22M
TGS Management's Fred Taylor and FivePoint's Daniel Hedigan
TGS Management pays $240M to buy 42 acres for Irvine data hub
TGS Management pays $240M to buy 42 acres for Irvine data hub
Susan Phillips, a professor of environmental analysis and director of Pitzer College’s Robert Redford Conservancy for Southern California Sustainability and San Bernardino County Supervisor Curt Hagman with warehouses in San Bernardino county
IE warehouse boom generates call for building moratorium
IE warehouse boom generates call for building moratorium
arrow_forward_ios

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

Loading...