Anchor Tenant

What is an anchor tenant?

An anchor tenant, also known as a draw tenant or key tenant, is a prominent retail tenant in a commercial property, typically a shopping centre or mall, that attracts a significant number of customers and businesses to the location. Anchor tenants are usually large, well-known retail chains or department stores that draw foot traffic, benefiting smaller retailers and increasing overall property value and revenue.

Importance of an anchor tenant

Anchor tenants play a crucial role in the success and viability of a shopping centre or retail complex. Their significance includes:

• Foot traffic generation: Anchor tenants attract a large number of customers, which benefits other retailers in the vicinity by increasing foot traffic and potential sales.
• Increased property value: The presence of a reputable anchor tenant can enhance the value and appeal of a retail property, making it more attractive to investors and potential tenants.
• Stability and credibility: Anchor tenants often sign long-term leases, providing financial stability and a steady income stream for property owners. Their established brand and reputation lend credibility to the shopping centre, attracting other retailers.
• Marketing leverage: Property owners can leverage the presence of anchor tenants in marketing and promotional efforts, drawing attention to the shopping centre and boosting overall business activity.

Characteristics of anchor tenants

Anchor tenants typically exhibit the following characteristics:

• Large retail space: Anchor tenants usually occupy substantial retail spaces within a shopping centre, often multiple floors or large single-level areas.
• Brand recognition: These tenants are well-known, established brands that draw customers based on their reputation and product offerings.
• Long-term leases: Anchor tenants often commit to long-term leases, sometimes spanning several decades, providing financial security to property owners.
• High sales volume: Due to their size and brand recognition, anchor tenants generally generate high sales volumes, contributing significantly to the overall revenue of the shopping centre.

Examples of anchor tenants

Common examples of anchor tenants in Australia include:

• Major department stores such as Myer, David Jones, and Target
• Large supermarkets like Coles and Woolworths
• Big-box retailers such as Bunnings Warehouse and Kmart
• Popular entertainment venues like Hoyts or Event Cinemas

Anchor tenant in action

Consider the scenario of a new shopping centre development in Sydney. The developers secure a lease with a prominent department store, such as Myer, as the anchor tenant. This attracts other retailers to lease space in the shopping centre, knowing that Myer will draw significant foot traffic. Smaller businesses benefit from increased customer visits, leading to higher sales and a thriving retail environment. The presence of Myer also boosts the shopping centre’s marketability and property value, attracting more investors and enhancing overall business success.

Learn more

Financial confidence comes with learning. Explore Funding’s Learning Centre and read these helpful blogs:

• How does bridging finance work: A guide for aspiring property investors
• Tips for aspiring property investors: Leveraging bridging loans for success
• Target return: Maximising your investment potential in wholesale property investing

Conclusion

Understanding the role and importance of an anchor tenant is vital for anyone involved in commercial property investment or development. Anchor tenants not only draw significant foot traffic, benefiting smaller retailers, but also enhance the value and marketability of a property. By recognising the impact of anchor tenants, investors and developers can make informed decisions that contribute to the success and stability of retail centres.

For more information on commercial property loans and how to finance your next investment, visit Funding’s commercial loans page.