Why do malls charge department stores lower rent than speciality stores?
Malls need to attract at least a couple of “anchor tenants” — well known names that will take a lot of space for a long time, and are sufficiently solid financially to be reliable, and will attract traffic for all of its stores, food court and services. Anchor tenants are money-spinners and traffic-generators. Smaller tenants pay more per square foot because they take small spaces. They are more risky financially. There’s more turnover, therefore more costs to replace one which leaves. Variable rent based on sales helps keep mall space per sq ft more competitive with strip-malls and other retail spaces. It also offers “incentive compensation” for the mall to do a good job advertising, promoting, and generating more traffic flows for their tenants.
