There are many areas to consider when strategizing which anchor tenant is the best fit for a new project. For developers trying to secure an anchor tenant, quality is key. If tenants lack significant credit, the next thing to consider is the number of other stores, their performance in similar markets and how well the proposed anchor will complement existing tenants and the surrounding area demographics.
Also, the best centers with the most success offer experiences to engage guests. In evaluating retail investment opportunities across the country, we’ve found that the most successful developers/landlords are those that have transformed well-located centers from traditional anchor-driven big boxes to ones that focus on creating community-like spaces for people to gather and congregate rather than only shopping.
Alternatively, landlords that own a center and have an anchor tenant vacating should evaluate all options, including the ability to divide the space for multiple tenants, redevelop completely or reposition to a new, value-enhancing use.
The bottom line
As categories of anchor tenants evolve, a center’s bottom line can be affected by activities such as renovating, reinvesting and financing. This leads to an increased tenant mix, less reliance on traditional anchor tenants to drive traffic, and the ability to reposition assets to better serve the consumer. Added revenues from these types of centers should follow as a result. Tenants that take up smaller footprints can, in turn, be charged higher rents. However, the cost of repositioning or redeveloping will drive the decision-making process from heavy redevelopment to a lighter repositioning/retenanting situation.
Calmwater Capital contributes regularly to CPE’s Capital Markets Update.