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

TRD 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: Howard Schwimmer and Michael S. Frankel, with 1601 W. Mission Boulevard and 2757 E. Del Amo Boulevard (Credit: Google Maps)

Rexford Industrial adds to LA portfolio with $100M in acquisitions

Andrew McDonald and At Mateo in the Arts District

Cushman’s West Coast chief talks expansion, DTLA market, the death of the starving baby broker & more

3339 Exposition Blvd. and Asher Luzzatto

Luzzatto Co. assembling creative office hub in West Adams

Jason Illoulian and the Cemex plant

Faring makes $30M assemblage play on WeHo/LA border

From left: Nuveen CEO Vijay Advani, Graymark founder/CEO Brian Hecktman

Graymark, Nuveen pay $97M for El Segundo creative office

La Mirada industrial building

Clarion pays $77M for La Mirada industrial project

510 Park Avenue and CEO of Monster Beverage Rodney Sacks

Monster Beverage affiliate guzzles down industrial project in San Fernando

From left: Saeed Nourmand, Michael Nourmand, Grant King and Richard Heyman

Relevant Group sues Nourmand & Associates’ founder, alleging extortion over hotel projects

arrow_forward_ios
Loading...