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When you lose a major commercial tenant

On Behalf of | Oct 18, 2018 | Commercial Real Estate |

Losing a major tenant can raise many concerns for a commercial property owner.

The possibility of suffering such a loss may be on the minds of many owners of retail space, such as mall owners, with the recent news of the Sears bankruptcy. The company is a major tenant of many different properties, with its stores leasing space throughout the country. So, how many of the company’s stores end up closing over the course of the bankruptcy could have big implications for retail property owners.

When a commercial property owner loses any tenant, how efforts to re-lease the now-vacant space go can be very impactful. Losing a major tenant can raise special challenges related to re-leasing space.

For one, a major tenant may have been leasing multiple spaces from the owner. Also, losing such a tenant could lead to a property owner losing other tenants as well. For example, commercial lease agreements for retail property sometimes contain co-tenancy clauses giving tenants certain options, such as the option to leave a lease, when an anchor tenant of a property bails.

So, the loss of a major tenant can leave a property owner facing the prospect of a lot of space going vacant at once.

Also, major tenants often lease particularly large spaces. Sometimes, when large spaces become vacant, a property owner ends up having to break the space down into smaller spaces and try to re-lease it to multiple parties.

How big of challenges these kinds of factors would pose for commercial property owners can vary based on many things, including how high demand currently is for their space and what is happening in the rent market for the type of commercial property in question.

So, after losing a major tenant, it can be important for a commercial property owner to develop a re-leasing strategy well-suited to the circumstances. Also, when re-leasing the space vacated by such a tenant, it is critical for an owner to exercise care when it comes what terms the lease agreement contains, as such terms could have major impacts both in the present and the future. Real estate attorneys can assist commercial landlords with leasing issues.