The Leverage Trap: Why Developers Should Rethink the Anchor

There is a common assumption in retail development that the anchor tenant has to come first. Get the big name committed, prove the project has enough demand to justify moving forward, and then use that lease to help make the rest of the development pencil. It makes sense on the surface, but it can create a strange dynamic: the tenant whose presence makes the project possible can also have the most leverage over the economics of the deal.

That is where I think developers should start thinking differently about sequencing.

The traditional approach often revolves around landing the anchor before breaking ground. The anchor gets the space it wants, along with the concessions required to make the deal work, and the developer accepts a significant amount of cost in exchange for having that recognizable tenant on the site. Depending on the project, the combination of tenant improvements, rent structure, free rent, and other incentives can leave the developer with very little margin on the anchor itself.

The expectation is that the rest of the center will make up the difference.

That means the outparcels and inline spaces aren't simply additional pieces of the project. They're carrying some of the economic burden of getting the anchor across the finish line. If the developer has already committed significant capital and structured the entire project around one tenant, the anchor knows exactly how much everyone needs the deal to happen.

That's leverage.

So what happens if you reverse the sequence?

Instead of treating the anchor as the starting gun, start with the parts of the project that can move faster. Pads and outparcels can often be entitled and developed more quickly than a large anchor box, while QSR ground leases or pad sales can generate capital that helps fund site work and other early development costs.

Now the project is moving before the anchor is signed.

That changes the conversation.

Once the outparcels are committed and the inline space starts filling in, the developer is no longer sitting across the table from an anchor tenant with an entire project riding on their signature. There is already activity on the site, there is capital in the project, and there is evidence that other tenants see value in the location.

The anchor is still important, but it isn't the only thing holding the deal together.

That distinction matters enormously in a negotiation. If the developer needs the anchor more than the anchor needs the project, the tenant has a natural advantage. But if the developer has already created momentum through the rest of the center, the negotiation becomes much closer to a two-sided conversation. The developer can evaluate the anchor's economics against the value it actually brings to a project that is already taking shape, rather than simply accepting whatever terms are necessary to get construction started.

This isn't an argument for abandoning anchor tenants or pretending that every retail center can be developed without one. There are markets, projects, and financing structures where the anchor is absolutely essential. The point is that developers should question whether it always needs to be the first domino to fall.

In development, sequencing is a form of leverage.

The more pieces you can move independently, the less dependent the entire project becomes on any single negotiation. And when you're negotiating the most expensive or strategically important lease on the site, having options is almost always better than needing a signature.

That's ultimately what this strategy is about: creating enough momentum that the anchor becomes an important part of the development rather than the condition for the development to exist at all.

Sometimes the best way to negotiate with your biggest tenant is to make sure you don't need them to make the first move.