Anchor tenant
An anchor tenant is the large, central tenant in a shopping centre, office building or logistics facility that draws in other tenants and visitors. The term comes from the shopping centre industry, where a large anchor department store at each end of the centre created footfall through the whole building. Today it is used more broadly about any tenant large enough to define the building and that other tenants deliberately locate next to.
The anchor tenant typically has a longer lease than other tenants, often 10-15 years, and negotiates better terms than small tenants: lower rent per square metre, flexibility on expansion, requirements about how the building's overall tenant mix is marketed, a veto against competing tenants ("exclusivity clauses") or control over the shared marketing budget. In return, the anchor brings a name that is meant to drive footfall and that is often named in the landlord's marketing material, sales prospectuses and the centre's external signage.
The owner's dependence on a single tenant is a well known risk and feeds straight through into yield, WAULT and market value. If you lose the anchor, visitor numbers in a shopping centre fall, and falling footfall means falling revenue for the neighbouring tenants, who then negotiate their own rent down or move out. Due diligence on a building with a dominant anchor tenant therefore always looks at the anchor's creditworthiness, revenue trends in the shops, lease length, break clauses and the cost of replacing the anchor with a new tenant. In pricing, a "single tenant" premium is added to the capitalisation rate for buildings where more than 50% of the rent comes from one party.
In the office segment the same phenomenon is sometimes called a "named tenant" and works much as it does in retail, but with different triggers: a main tenant with a well known brand gives the building an identity (Aker Brygge, the Schibsted building, the DNB building) and lowers the re-letting risk for the rest of the building. In logistics facilities it is common for the whole building to be built for one tenant (build-to-suit) on a long bare-house or triple-net lease, and then the entire contract value is tied to that single tenant's credit.
Norwegian shopping centre leases follow husleieloven (the Tenancy Act), but most of the act's rules can be set aside in leases for commercial premises, see husleieloven § 1-2, so Commercial Leasing agreements are consistently shaped by freedom of contract. The terms between landlord and anchor tenant are therefore negotiated individually in practice and vary considerably. Turnover rent, where the anchor pays a base rent plus a percentage of revenue above a threshold, is very common in shopping centres and gives the landlord a share in the anchor's upside, but also exposure to the anchor's downside.
In Placepoint you can look at a property in the property panel and see which businesses are registered in the building, so you quickly get an overview of whether one tenant dominates the overall area split. The example Tenant prospecting shows how you can identify anchor tenants in an area as part of your market analysis.
How this looks in Placepoint
In Placepoint you find this in Property panel - Units and Tenants:
From Placepoint's dictionary: Anchor tenant
More information: Lovdata: Husleieloven § 1-2 (lease of commercial premises), Eiendom Norge: Market Reports, Newsec: Property Asset Management
English: Anchor tenant.
Common questions
What is an anchor tenant?
A large, named tenant that attracts other tenants and visitors to a building. Common in shopping centres, office buildings and logistics facilities. The anchor tenant has a longer lease and better terms than the small tenants in the same building.
Which terms are typical for anchor tenants?
Longer lease length (10-15 years), lower rent per square metre, flexibility on expansion, marketing requirements and sometimes a veto against competing tenants. In shopping centres, turnover rent is common.
Why is a single anchor tenant risky?
If the building loses the anchor, footfall and income fall for the remaining tenants. Valuers therefore add a "single tenant" premium to the capitalisation rate for buildings where more than half of the rent comes from one party.
Does Norwegian tenancy law apply to anchor tenants?
Yes. Commercial Leasing agreements are governed by husleieloven, but with wide freedom of contract. Terms between a landlord and an anchor tenant are negotiated individually and vary a great deal.