Anchor tenant: what it is and how a shopping centre manages the lease

An anchor tenant is a large, well-known tenant whose presence draws visitors to a shopping centre and so brings customers to the other tenants. It is usually a department store, a supermarket or hypermarket, a cinema or a large fashion, sports or electronics chain, and it normally occupies one of the biggest units in the centre. The shop itself is often called the anchor store.

What an anchor tenant is

The anchor tenant is the one that visitors come to the centre for in its own right. The smaller tenants, often called inline or satellite tenants, depend on the footfall the anchor brings past their doors. A centre can have one anchor or several, usually placed at the ends of the centre or next to the main entrances, so that visitors pass the other units on the way.

Anchor tenant and anchor store mean the same thing seen from two sides: the anchor tenant is the retailer on the lease, and the anchor store is the unit it trades from. A junior anchor, or mini anchor, is a smaller unit with the same role, for example a sports chain or a discount store. In an office building the anchor tenant is the large occupier that fills most of the floors. This guide is about shopping centres.

Why centres want anchor tenants

An anchor gives a centre three things. Footfall, because the anchor’s customers walk past the other units and some of them go in. Letting power, because smaller retailers sign more readily, and pay more per square metre, in a centre with a strong anchor. And stability, because the anchor signs a long lease, which supports the value of the centre and its financing.

That is why the anchor is usually the first lease signed in a new centre, and why losing one is the biggest single risk a centre manager faces.

How an anchor lease differs

An anchor lease is a commercial lease with the balance shifted towards the tenant, because the anchor knows what it brings. The usual differences:

• Term: a long term, often well over ten years, against three to five years for a small unit.
• Rent: a lower base rent per square metre than the small units pay, often with a rent-free period at the start or a contribution to the fit-out.
• Rent changes: rent steps and indexation as in other leases, and in many centres a turnover rent clause, so that the landlord shares in the anchor’s sales.
• Options: break options and renewal options for the tenant.
• Clauses about the centre: co-tenancy, exclusivity, opening hours and signage, which bind the landlord as much as the tenant.

How the fixed rent is set, and how turnover rent is calculated from a breakpoint, are covered in our guides to base rent and turnover rent. This guide explains the mechanics. What a lease may or must say is a matter for your legal adviser.

Co-tenancy and exclusivity clauses

Two clauses are typical of centres with anchors, and both sit in the leases of the other tenants as much as in the anchor’s own.

A co-tenancy clause ties a smaller tenant’s obligations to the presence of the anchor, or to a level of occupancy in the centre. If the anchor closes, or the centre falls below the agreed occupancy, the smaller tenant may be entitled to a reduced rent, for example a turnover-only rent for a period, and in some leases to end the lease if the situation lasts. The clause names the anchor or the occupancy level, the time the landlord has to replace the anchor, and the remedy.

An exclusivity clause gives a tenant the right to be the only one of its kind in the centre, for example the only supermarket or the only coffee chain. It is the landlord who has to respect it when letting the next unit.

For the landlord both are obligations with conditions and dates. The practical way to run them is to record each clause on the lease it belongs to, with the tenant it refers to, the condition that triggers it and the date by which the landlord must act. Then the question of what happens if the anchor leaves has an answer before it is asked.

When an anchor tenant leaves

Anchors do leave: at a break option, at the end of the term, or because the chain closes stores. The centre team then works on three fronts.

• The dates. The anchor’s break option, its notice period and its expiry are critical dates on the lease. The time to prepare is before the notice window opens, not after the notice arrives.
• The other tenants. Which leases have a co-tenancy clause tied to this anchor, what each one gives the tenant, and how long the landlord has to replace the anchor. This is where the rent of the whole centre is exposed.
• The footfall. Footfall per entrance and per floor shows what the anchor actually brought in, which entrances and wings depend on it, and later whether the replacement brings the visitors back.

The unit itself is often too large for a single replacement, so it is re-let as several smaller units: the old unit is ended on a date and the new units start from the next day, each with its own lease, area and end date. An anchor’s departure is as much a data question as a leasing question: the leases, the clauses, the dates and the footfall need to be in one place.

How VemLease handles anchor leases

In VemLease an anchor lease is a lease like any other, with the rules the anchor negotiated on it. Rent steps, indexation and turnover rent are set on the lease in one flow. Clauses, break options and control dates are on the lease, and critical dates, options and renewals are tracked with alerts before they fall due.

Sales that the anchor reports through VemTenant flow into turnover rent, with reminders for tenants who have not reported and a lock on the entry window. Footfall from Vemcount, per entrance and floor, sits next to the lease data. The rent roll, invoice management and revenue tracking sit in one system across all assets and entities. One lease can hold several units, each with its own end date, and when an anchor unit is split or merged it is ended, never deleted, so its history stays.

Read more about lease tracking and critical dates and the rent roll, or see how it fits a centre on the page for shopping centres.

Questions about anchor tenants

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