For much of the last decade, lifestyle centers were all the rage among developers. But even at the height of their popularity, there was a looming concern about the structure of their leases and the widespread use of co-tenancy clauses.
Co-tenancy clauses are provisions under which retail tenants are granted concessions if one or more tenants in a center leave or the project goes dark. Leases at regional malls and grocery-anchored shopping centers typically feature co-tenancy clauses in connection to project anchors.
But because lifestyle centers typically do not have anchors, in order to ensure top tenants sign onto projects, developers allow generous co-tenancy clauses. In many cases, these clauses are granted on lists of up to 10 retailers.