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Anchor Tenants in Commercial Real Estate

What are Anchor Tenants in Commercial Real Estate? 

Anchor tenants are the largest or most prominent stores in a retail commercial real estate development. They generally help draw customers into the area. In strip centers and power centers, anchor tenants are often big-box stores or grocery stores. In shopping malls, they're more likely to be department stores.

A strip mall usually has one or two anchor tenants, a power center often has three or four, while a regional mall may have five or six, depending on its size. Anchor tenants often receive significant concessions from landlords, including reduced rent, as well as a certain degree of input on which other tenants are allowed to move into the shopping center. 

Anchor Tenants Can Increase Shopping Center Traffic and Improve Occupancy Rates 

One of the major benefits of having an anchor tenant in a retail development is the massive boost in credibility it provides. For example, if potential tenants know that a Walmart or a Target is moving into a strip mall, they're far more likely to feel comfortable signing a long term lease there.

In addition, having a regionally or nationally known anchor tenant tends to draw significant foot traffic to the shopping center. For instance, a family may decide to go grocery shopping at a strip mall or power center, get a quick bite to eat at a casual restaurant there, and then pick up medication at the pharmacy, all without leaving the shopping center itself. 

A Changing Landscape Has Some Developers Rethinking Anchor Tenants 

While it's true that anchor tenants are still an essential part of retail developments across the United States, the declining popularity of department stores has some developers reimagining how to draw in customers, especially at larger malls.

In some cases, developers are trying to attract niche stores, such as the Apple Store, which is highly likely to draw in visitors. In other cases, they're using alternative anchor tenants such as gyms. In addition, the decline of traditional mall anchors has lead to an increase in the popularity of mixed-use developments (where the customers are already there), and an increase in green spaces, in order to help retain customers for longer periods of time. 

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