Ancillary Tenant

What is an ancillary tenant?

An ancillary tenant, often referred to as a satellite tenant, is a smaller, complementary retail tenant in a commercial property, such as a shopping centre or mall. Ancillary tenants typically occupy less square footage than anchor tenants and include various retail categories, such as specialty shops, service providers, and restaurants. They help create a diverse and attractive tenant mix, contributing to the overall appeal and functionality of the retail environment.

Importance of an ancillary tenant

Ancillary tenants play a vital role in the success of a shopping centre or retail complex. Their significance includes:

  • Diverse tenant mix: Ancillary tenants provide a variety of products and services, enhancing the shopping experience and attracting a broader range of customers.
  • Complementary offerings: These tenants complement anchor tenants by offering additional products and services that enhance the overall shopping experience and encourage longer visits.
  • Increased revenue: By attracting more customers and encouraging longer visits, ancillary tenants help increase overall sales and revenue for the shopping centre.
  • Flexibility and innovation: Ancillary tenants often bring new and innovative retail concepts, keeping the shopping centre fresh and appealing to customers.

Characteristics of ancillary tenants

Ancillary tenants typically exhibit the following characteristics:

  • Smaller retail space: Ancillary tenants usually occupy smaller retail spaces compared to anchor tenants, often in the range of 500 to 2,000 square feet.
  • Variety of retail categories: These tenants include specialty retailers, service providers, food and beverage outlets, and entertainment venues.
  • Higher turnover: Ancillary tenants may have shorter lease terms and higher turnover rates compared to anchor tenants, providing opportunities for new and innovative retailers to enter the market.
  • Local businesses: Many ancillary tenants are local businesses or franchises, contributing to the unique character and appeal of the shopping centre.

Examples of ancillary tenants

Common examples of ancillary tenants in Australia include:

  • Specialty retailers such as clothing boutiques, electronics stores, and gift shops
  • Service providers like hair salons, nail salons, and dry cleaners
  • Food and beverage outlets such as cafes, fast food restaurants, and specialty food shops
  • Entertainment venues like arcade centres, small cinemas, and fitness studios

Ancillary tenant in action

Consider a shopping centre in Melbourne that has several anchor tenants, including a major department store and a large supermarket. To enhance the shopping experience and attract a diverse customer base, the shopping centre includes various ancillary tenants such as a boutique clothing store, a popular café, a nail salon, and a fitness studio. These ancillary tenants provide complementary products and services, encouraging customers to spend more time and money at the shopping centre. The presence of these tenants enhances the overall appeal and functionality of the retail environment, contributing to the shopping centre’s success.

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Conclusion

Ancillary tenants are essential components of a successful shopping centre or retail complex. They provide a diverse range of products and services that complement anchor tenants, enhance the shopping experience, and attract a broader customer base. By understanding the role and importance of ancillary tenants, property owners and developers can create more attractive and successful retail environments.

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

DISCLAIMER: The information provided on this page is for general informational and educational purposes only and is never intended as financial advice. While we strive to ensure that the content is accurate and up-to-date, it may not reflect the most current legal or financial developments. Always consult with a qualified financial advisor or professional before making any financial decisions. Use the information at your own risk.

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