Definition
An ancillary tenant is a tenant in a shopping center that occupies a smaller space and usually provides specialized goods or services. Unlike an anchor tenant, which usually draws significant foot traffic and occupies a large area, ancillary tenants include retailers like tailor shops, hairstylists, and pet stores. They typically pay higher rental rates than anchor tenants due to their smaller space and lower capacity to attract a high volume of shoppers.
Examples
- Tailor Shop: A tailor shop that offers custom tailoring and alterations within a shopping center. It occupies less space and caters to a niche market.
- Hairstylist: A small hair salon that provides services such as hair cuts, styling, and color treatments. It attracts a specific clientele and occupies a smaller retail space.
- Pet Store: A specialty retail shop selling pet food, supplies, and sometimes offering grooming services within the shopping center. Unlike an anchor tenant like a supermarket, it generates less foot traffic.
Frequently Asked Questions
What is the difference between an anchor tenant and an ancillary tenant?
- Anchor Tenant: A large, often nationally or regionally recognized store, such as a grocery store or department store that draws a significant number of shoppers to a shopping center.
- Ancillary Tenant: Smaller tenants that offer specialized products or services. They benefit from the foot traffic generated by anchor tenants but are not the primary draw themselves.
Why do ancillary tenants pay higher rental rates than anchor tenants?
Ancillary tenants generally pay higher rental rates due to their smaller size and limited ability to draw substantial foot traffic on their own. The prime location and amenities offered within the shopping center justify the higher rental costs.
Ancillary tenants benefit from the foot traffic generated by anchor tenants. They complement the offerings of anchor tenants, which increases convenience for shoppers, potentially leading to increased sales for these smaller businesses.
While anchor tenants are crucial for driving significant foot traffic, ancillary tenants provide a diverse range of goods and services, enhancing the overall shopping experience. A successful shopping center typically needs both to attract a wide range of shoppers.
Anchor Tenant
An anchor tenant is a major tenant in a shopping center, usually occupying a large area and serving as the primary draw for shoppers. They significantly influence the success of smaller, neighboring stores.
Retail Mix
The combination of different types of stores and services available within a shopping center. A diverse retail mix, including both anchor and ancillary tenants, is important for attracting a broad customer base.
Commercial Lease
A legally binding contract between a landlord and tenant outlining the terms and conditions under which a commercial property will be rented (e.g., a space within a shopping center).
Online Resources
- International Council of Shopping Centers (ICSC)
- Urban Land Institute (ULI)
- National Retail Federation (NRF)
References
- “Retail Leasing Strategies” by Urban Land Institute
- “Real Estate Finance & Investments: Risks and Opportunities” by Peter Linneman
Suggested Books for Further Studies
- “Shopping Center and Store Leases” by Emanuel B. Halper
- “Retail Property Risk Management” by Larry Hagins
- “Real Estate Investment and Acquisition Workbook” by Howard Zuckerman, Jack Friedman
Real Estate Basics: Ancillary Tenant Fundamentals Quiz
### What does an ancillary tenant typically offer within a shopping center?
- [ ] Significant foot traffic and numerous large-scale services.
- [x] Specialized goods or services such as tailoring or pet supplies.
- [ ] A wide variety of general merchandise that appeals to everyone.
- [ ] Major brand recognition on a national or regional level.
> **Explanation:** Ancillary tenants usually offer specialized goods or services that complement the main attractions provided by anchor tenants.
### Who generally has higher rental rates: anchor tenants or ancillary tenants?
- [x] Ancillary tenants
- [ ] Anchor tenants
- [ ] Both pay equal rental rates
- [ ] Rental rates vary unpredictably regardless of tenant type
> **Explanation:** Ancillary tenants generally have higher rental rates because they tend to occupy smaller spaces and do not draw as much foot traffic as anchor tenants.
### What aspect of ancillary tenants is crucial for a successful shopping center?
- [ ] Large square footage
- [ ] Sole focus on merchandise sales
- [ ] Ability to draw significant foot traffic independently
- [x] Providing a diverse range of goods and services
> **Explanation:** Ancillary tenants contribute to a successful shopping center by diversifying the range of goods and services available, adding convenience and variety for shoppers.
### Which tenant usually draws significant foot traffic to a shopping center?
- [ ] Ancillary tenants
- [x] Anchor tenants
- [ ] Restaurant tenants
- [ ] Seasonal kiosks
> **Explanation:** Anchor tenants are typically stores like department stores or supermarkets, which attract a large number of shoppers.
### What type of businesses often serve as ancillary tenants in a shopping center?
- [ ] Large supermarkets
- [x] Specialty shops, such as tailor stores or pet shops
- [ ] Department stores
- [ ] Movie theatres
> **Explanation:** Specialty shops like tailor stores or pet shops usually serve as ancillary tenants.
### Which term describes the combination of different types of stores in a shopping center?
- [x] Retail Mix
- [ ] Commercial Lease
- [ ] Anchor Composition
- [ ] Tenant Integral
> **Explanation:** The term "Retail Mix" describes the combination of different types of stores and services available in a shopping center.
### Why might a shopping center include a variety of ancillary tenants?
- [ ] To comply with local regulations
- [x] To attract a broad customer base and enhance shopper experience
- [ ] Because they are easier to manage
- [ ] To reduce the space used by larger tenants
> **Explanation:** Including a variety of ancillary tenants helps attract a diverse customer base and enhances the overall shopping experience.
### What benefit do ancillary tenants primarily gain from anchor tenants?
- [ ] Increased rental rates
- [ ] Greater rental space options
- [x] Enhanced foot traffic
- [ ] More lucrative leasing terms
> **Explanation:** Ancillary tenants benefit from the enhanced foot traffic attracted by anchor tenants.
### True or False: A shopping center can succeed without any ancillary tenants.
- [ ] True
- [x] False
> **Explanation:** Ancillary tenants are crucial for providing a range of goods and services that complement the offerings of anchor tenants, contributing to a well-rounded shopping experience.
### What generally characterizes the spaces occupied by ancillary tenants?
- [ ] They occupy the largest spaces available
- [ ] They feature the most crucial attractions of the center
- [x] They occupy smaller, specialized spaces
- [ ] They force out competition among neighboring stores
> **Explanation:** Ancillary tenants typically occupy smaller, specialized spaces within a shopping center.
