Redefining the Anchor Tenant

IREM members and retail professional provide insight

by Diana Mirel

The following is an excerpt from the Jan/Feb 2008 issue (Volume 73, Number 1) of JPM®, Journal of Property Management.

Shopping centers will always be in a state of constant change and evolution. In order to keep up with shifting consumer demands and shopping trends, foresight and flexibility are critical to any shopping center’s success in today’s market. As shopping centers evolve, anchor tenants are finding creative ways to stay viable, and owners and managers are following suit to adapt to consumer tastes.

Simply defining an anchor tenant in today’s market is tricky. In the past, anchors were typically supermarkets and department stores. But, today’s anchors can be anything from full-service department stores, mass merchandising retailers and grocery stores, to movie theaters, restaurants, bookstores, electronic stores, upscale retailers, and gourmet food and wine markets.

“One characteristic that qualifies a store as an anchor is that the particular use of the space will drive traffic to that site,” says Susan Sgrignoli, CPM®, general manager of Southwest Plaza in Littleton, Colo., which is owned by General Growth Properties, Inc. (GGP).

Anchor will not only drive traffice and sales to the center, but they can also influence the remaining inline tenant mix of the center.

“The anchor tenants set the tone for the center,” said Alan Alexander, president of Alexander Consultants and a former CPM. “Because of their being there, the rest of the center becomes viable. Without them, you are not going anywhere.”

In today’s market, anchor tenants can no longer rely on their size and influence alone to make their marks on the shopping center environment. To keep up with shifting consumer demands and shopping trends, shopping center owners and managers are working with anchor tenants to ensure that they keep up with the times.

Anchor Origins

The concept of the anchor tenant was born in the 1950s, when developers built regional malls with large department stores as the central figures.

“The anchors were the reason people went to the mall, and all the inline stores fed off that traffic,” said Ed Shriver, principal at Strada LLC in Pittsburgh.

Then, in the early 1980s, developers, shopping center owners and managers realized that restaurants and food courts were attracting people to the centers . This attention shift quickly transformed non-traditional establishments into a new type of anchor tenant. From there, large bookstores, like Barnes & Noble and Borders, movie theaters and other entertainment-themed tenants became anchor-worthy.

“Sometime in the 1980s, the whole definition of anchor kind of exploded,” said Shriver. “All of a sudden anything that could be a major draw became an anchor.”

With so many different types of shopping centers - from the regional malls to lifestyle centers - able to attract a variety of consumers, and therefore a variety of anchor tenants, there is no hard and fast definition of an anchor tenant.

“The things that are driving change in the shopping center industry in all cases are driven by the changing consumer,” says Sgrignoli. “The story will be different for every property.”

Demographic Delivery

Department stores, in particular, are anchor tenants that continue to change and evolve. Some have reduced their sizes through the years, in order to not become obsolete in today’s regional mall environment. In fact, department stores make up about 50 to 75 percent of an enclosed shopping center, according to Sgrignoli.

“It is my belief that you have to have the large department stores to be a true shopping center,” said Pamela Schenck, senior general manager of Park Meadows in Lone Tree, Colo., a shopping center owned by GGP. “That is the destination. That is part of the formula.”

However, department stores must be open to change in order to effectively cater to their demographics, said Sgrignoli. When a department store inside Southwest Plaza went bankrupt, Dillard’s - another retailer in the center - purchased the space and relocated. The move allowed Dillard’s to appeal to the plaza’s affluent and discerning clientele. The square footage of the store increased from 130,000 square feet to 180,000 square feet and Dillard’s was able to construct a Class A store with marble floors, elegant fixtures and upscale merchandise.

“They up-sized the cosmetics counter, expanded the shoe and the luggage departments, and they took a close look at their departments and selectively branded those departments to further drive sales,” said Sgrignoli.

By carefully analyzing the market trends, Dillard’s successfully launched the re-imaged store.

“They made a huge investment in our community, and in our center, by rebuilding and giving us this new store,” said Sgrignoli. “It has been extremely well received, and it has driven a lot of great activity to the enclosed shopping center itself.”

The full article is available as an online exclusive in the Jan/Feb 2008 JPM® issue.

IREM Members have free access to the JPM® online archives and the “Online Exclusives,” articles that are only available on the IREM Web site. Non-members can subscribe to JPM® at www.irem.org/jpm.