Negotiating a co-tenancy clause is a crucial aspect for commercial real estate investors, especially those in the retail space. This clause ensures that a tenant can benefit from the foot traffic generated by surrounding businesses. As a landlord, it’s important to understand the impact of co-tenancy on the tenant’s business and negotiate terms that are mutually beneficial.
One strategy is to include a “kick-out” clause that allows tenants to terminate the lease if a certain percentage of surrounding businesses close or leave the center. This clause protects the tenant’s investment and creates a sense of security that they won’t be left with an empty storefront.
Another tip is to negotiate the co-tenancy clause at the beginning of the lease term. This way, the landlord can attract tenants by demonstrating their willingness to work with them and build a prosperous retail environment.
When negotiating rent, landlords should be mindful of how co-tenancy impacts their tenant’s business. If a surrounding business closes, it could result in a decrease in foot traffic and ultimately impact the tenant’s sales. In such cases, landlords may need to be flexible with rent to retain the tenant and maintain a thriving retail environment.
Final Thoughts
Co-tenancy clauses in commercial real estate have become increasingly important in the retail industry. These clauses can provide tenants with some level of protection and security, ensuring that their business is not negatively impacted by the departure of a key anchor tenant. Landlords, on the other hand, must carefully consider the inclusion of co-tenancy clauses in their leases, as they can have significant financial implications.
Ultimately, it is important for both tenants and landlords to negotiate lease agreements that are fair and balanced, taking into account the unique circumstances of each property and tenant. Overall, co-tenancy clauses are just one of many factors to consider when leasing commercial real estate, but they can play a critical role in the success of a retail business and the overall profitability of a property.
