Effectively handling an anchor tenant renewal is possibly the most important factor in maximizing the value of a shopping center. Ideally, an industry expert with an abundance of anchor tenant experience should be engaged at least 12-18 months before the expiration with the retailer. The first step is to understand as much as possible about the existing tenant.
- What are their sales and how does that compare to their chain average?
- How is the company doing financially and what cap rates do their leases currently command?
- What is their current real estate strategy and prototype size and where are their nearest stores.
- Is the current property still a good fit for them based upon these factors?
The second step is to fully understand the market.
- What anchor spaces are currently on the market and what are the asking rents?
- What are the terms of recent anchor tenant leases and how do those locations compare to the current property?
- Finally, what major chain anchor tenants have a void in the submarket and which ones have stores that are a candidate for relocation due to size or co-tenancy issues?
“With this information a landlord will have a very good sense of where they stand and what the goals should be.,” said Joe Parrott, CRX, CLS, senior vice president with CBRE. “When the anchor tenant reaches out prior to its option notice date to discover the landlord’s motivation, ideally a strategy is already in place.”
The owner’s goal may be that the tenant exercises its option, or, that they don’t exercise with the purpose of increasing rent or improving the tenant mix. A landlord needs to be armed with knowledge and information to effectively respond to this inquiry in a way that will increase the likelihood of the desired outcome.
Click here to read CBRE’s latest Anchor Tenant Report.