Retail Tenant Replacement Risk: “Anchor Fallout” Playbook

3 Star Retail (Strip Center)

Understanding Retail Tenant Replacement Risk

When a major anchor tenant in a shopping center or mall goes dark – whether due to bankruptcy, downsizing, or lease expiration – it triggers what industry insiders dub “anchor fallout.” Retail Tenant Replacement Risk refers to the financial and operational challenges landlords face in backfilling that large vacant space. Anchors (like department stores or big-box retailers) are linchpins that draw foot traffic and bolster occupancy; losing one can set off a domino effect of lost income, co-tenancy rent reductions, and even additional vacancies. For U.S. retail real estate investors – especially in open-air centers such as power centers and grocery-anchored centers – understanding this risk is paramount. This section provides an overview of why anchor fallout is so disruptive and sets the stage for the detailed playbook that follows.

An anchor vacancy is not just a large empty box; it often imperils the entire center’s performance. Many smaller inline tenants have co-tenancy clauses allowing them to demand rent cuts or even terminate their leases if a key anchor space isn’t quickly reoccupied. Typically, if an anchor goes out of business and isn’t replaced within a stipulated period, inline rents immediately reset – often to 50% of their original rent for up to a year. If the vacancy persists beyond a year, those tenants might walk away entirely. This “ripple effect” can turn one vacancy into a cascading loss of income. During the 2020 downturn, for example, a wave of department store closures (from J.C. Penney, Neiman Marcus, Macy’s, etc.) raised alarms about co-tenancy spirals. Landlords have since become more proactive – negotiating away co-tenancy and kick-out clauses in exchange for concessions – but the fundamental risk remains. In short, the fallout from a dark anchor extends far beyond that one space, threatening Net Operating Income (NOI), cash flow stability, and lender confidence across the asset.

Re-Tenanting Downtime and Vacancy Risks

One of the first challenges in an anchor fallout scenario is the downtime – the period a space sits vacant while the owner seeks replacement tenants. Large-format retail spaces are notoriously difficult to refill quickly, and downtime can be extensive. Market data indicates that backfilling a big-box or department store typically takes at least a year. Piper Sandler analyst Alexander Goldfarb noted that swapping out tenants in 25,000–50,000 sq. ft. boxes (such as former Bed Bath & Beyond stores) “usually takes at least a year”. In many cases, 12–24 months of vacancy is a base-case assumption for underwriting when an anchor leaves. This prolonged vacancy represents double jeopardy for owners: not only is the prior anchor rent lost for that period, but the empty store ceases to draw shoppers, which can hurt sales (and percentage rent) from remaining tenants.

Compounding the issue, a vacant anchor often triggers co-tenancy concessions as discussed above, effectively slashing revenue from other tenants during the downtime. For example, JLL retail restructuring experts note that inline tenants might immediately pay only half their rent while an anchor space is dark. Such clauses typically grant the landlord a cure period (often ~12 months) to re-lease the anchor space; if they fail, the tenant can then terminate the lease. This means an owner faces a period of severely depressed income at the same time they are incurring costs to re-tenant (more on those costs below). The risk to Debt Service Coverage Ratio (DSCR) is clear: a sudden drop in NOI can push DSCR below lender-required minimums (often ~1.25× for commercial mortgages), heightening default risk if debt payments can no longer be comfortably covered out of reduced cash flow. In essence, downtime is a hidden cost that erodes financial performance – every month of vacancy not only means foregone rent but can also undermine the property’s value perception and breach loan covenants.

Despite these challenges, it’s worth noting that broader market conditions can mitigate or exacerbate downtime risk. In the current post-2022 cycle, overall retail vacancy has been historically low – around 5.6% in early 2023, the lowest since 2007 – thanks to limited new construction and strong tenant demand. This tight market has helped many landlords re-tenant faster than in past downturns. For instance, after Bed Bath & Beyond’s 2023 bankruptcy, landlords reported strong interest from replacement tenants (discount chains, specialty grocers, sporting goods, furniture stores, etc.), which helped fill spaces more quickly. In fact, just two years after Bed Bath & Beyond’s liquidation, over half of its shuttered stores have already been backfilled or repurposed – a remarkable absorption rate driven by opportunistic retailers like Burlington, HomeGoods, and even non-retail uses (e.g. indoor pickleball centers) stepping into the void. This underscores that while a landlord should plan for long downtime in an anchor fallout scenario, a strong leasing market and creative reuse can shorten the pain. Nonetheless, prudent underwriting for Retail Tenant Replacement Risk assumes substantial downtime to be safe, especially in softer markets or for less desirable locations.

Rent Spreads: Old Anchor Lease vs. New Tenant Deals

A silver lining in many anchor replacements is the potential for positive rent spreads – i.e. the new tenants often pay higher rent than the outgoing anchor did. Legacy anchor leases were frequently signed decades ago at rock-bottom rates, especially in malls and older power centers. A famous example is Sears (and its sibling Kmart): many Sears stores had extremely low rents or favorable ground leases. Kimco Realty, a major open-air center REIT, reported that Sears’ average rent was just $5.25 per sq. ft. in its centers – the lowest of any top 50 tenant – whereas the average inline tenant paid about $15.95 per sq. ft. When such an under-market anchor is replaced with new retailers at current market rents, the increase can be dramatic. Landlords and analysts have noted that new leases can “double or triple” the rent that Sears or Kmart were paying. In one extreme case, Kimco demolished a Kmart in Staten Island and re-leased the site to multiple tenants, achieving rents 727% higher than the old Kmart lease – a staggering uplift highlighting how low some anchor rents had been locked in.

Recent anchor closures in open-air centers show similar trends. During Bed Bath & Beyond’s bankruptcy process, landlords anticipated that replacement tenants would pay 20–30% more rent than Bed Bath & Beyond had been paying. This is partly because the typical Bed Bath big-box (~25,000–35,000 sq. ft.) is a sweet spot for many expanding retailers – it’s “right-sized” for off-price chains, specialty grocers, dollar stores, sporting goods, etc., which are willing to pay top-of-market rents for well-located space. In other words, a struggling anchor’s closure can be an opportunity to re-merchandise the center with more profitable tenants at higher rents. Many REIT executives actually welcome the chance to recapture an anchor space for this reason. “We certainly are happy to get back the boxes,” one REIT analyst noted, as it allows landlords to refresh the tenant mix and move rents to market levels.

However, it’s important to temper this long-term upside with the short-term reality. The rent gap often only materializes after significant time and investment. While Sears’ replacement tenants might eventually pay triple the rent, the landlord likely endured 1–2+ years of zero rent during the transition, and spent millions on renovations (eroding some of the net gain). Furthermore, not all anchor replacements result in higher rent – if the departing anchor was already at market rent or if the owner opts for a non-retail use (like public use or entertainment) at a lower rent to maintain occupancy, there could even be a negative rent spread. A balanced view of Retail Tenant Replacement Risk acknowledges that rent upside is common in anchor turnovers, especially for older leases, but realizing that upside requires navigating the costs and downtime discussed throughout this playbook.

Capital Expenditures and Repositioning Costs

Replacing an anchor tenant often isn’t as simple as signing a new lease – it frequently entails significant capital expenditure (CapEx) to reposition or redevelop the space. Large anchors may occupy 50,000 to 150,000+ sq. ft., sometimes on multiple levels (in malls), and their layouts or conditions might not suit modern tenants. Landlords therefore must invest in demising the space into smaller units, updating façades, improving building systems, or even demolishing and rebuilding. According to REIT commentary around the Sears closures, “rebuilding the box” for a new tenant can run about $10–$12 million per site (roughly $100 per square foot). These hard costs include things like interior demolition, constructing new partition walls, installing new HVAC/electrical, and exterior renovations to refresh the appearance. In high-profile projects, costs can be even higher – for example, Macerich spent about $100 million (including buying out Sears’ interest) to redevelop the Sears at Kings Plaza in Brooklyn into a new wing with multiple retailers. While that is an outlier, it illustrates that anchor repositioning can essentially be a major redevelopment project.

In addition to base building CapEx, landlords must consider tenant improvement (TI) allowances and leasing commissions needed to secure new anchor replacements. Large retail tenants often demand substantial TI packages to build out their store interiors – especially if the space is being subdivided for smaller shops or converted to new uses. TI costs can easily reach $20–$40 per sq. ft. (or more) for a modern retailer buildout, which on a 30,000 sq. ft. box is $600k–$1.2M out of the landlord’s pocket. In some recent cases, energetic retailers like Burlington have taken over former anchor spaces without landlord TI contributions – opting to invest their own capital in exchange for low acquisition costs on leases. However, this is the exception rather than the rule. Usually, the property owner must foot the bill to attract quality replacements. Leasing commissions are another cost, typically calculated as a percentage of total lease value (often 4–6% spread over base term and options). For a 10-year lease at $500k/year, commissions might add another $200–$300k in re-tenanting cost.

All told, the total re-tenanting cost for an anchor space can reach several hundred dollars per square foot when combining hard and soft costs. A hypothetical example: to replace a 50,000 sq. ft. department store, a landlord might spend $5 million on base building work ($100/sq. ft.), $1 million on tenant allowances, and $250k on commissions – totaling $6.25M, before the new tenant starts paying rent. These upfront investments directly hit the owner’s cash flow or reserves, and they come at a time when the property’s income is already down due to the vacancy. This is why anchor fallout can strain Debt Service Coverage – not only is NOI reduced, but the owner may need to fund millions in CapEx, potentially requiring new financing or tapping corporate/partnership funds.

On the flip side, these expenditures are often necessary value-add investments. By repositioning the space, the owner is banking on higher future rents (as discussed) and possibly higher occupancy by creating spaces more in demand. Indeed, many retail REITs frame these outlays as redevelopment projects with target yields on cost. For instance, an owner might spend $10M to redevelop an old anchor but emerge with an extra $1M in annual NOI from a handful of new tenants – a 10% return on cost, which can justify the expense. Additionally, repurposing an anchor can unlock hidden value: some sites allow adding outparcel buildings or even non-retail additions (like apartments or hotels) on excess parking land. Those mixed-use densification opportunities require significant capital but can substantially boost an asset’s long-term value beyond what the old anchor provided. In summary, CapEx is an inherent part of the anchor replacement playbook – owners must budget for high upfront costs to reposition space and stay competitive, all while juggling the immediate financial hit of an underperforming asset.

Impacts on DSCR, NOI, and Asset Valuation

The departure of an anchor tenant reverberates through a property’s financial metrics. The most direct impact is on Net Operating Income (NOI) – the loss of the anchor’s rent (and any associated percentage rents or reimbursements) immediately lowers NOI. For example, consider a shopping center where an anchor was paying $500,000 in annual base rent. The moment that tenant goes dark (and stops paying), the property’s NOI drops by that $500k. At a capitalization rate of, say, 8%, that single lost income stream could imply a $6.25 million reduction in property value (since value is roughly NOI divided by cap rate). A real-world illustration: analysts note that even a modest $100,000 error in projecting income can swing value by $1.33 million at a 7.5% cap rate. Now scale that up – an anchor lease often involves hundreds of thousands (if not millions) in rent – and it’s clear that an anchor vacancy can erode appraised value significantly if not quickly mitigated.

Furthermore, the hit to NOI is often compounded by co-tenancy effects and re-leasing costs. As described earlier, co-tenancy clauses might force a landlord to temporarily halve rents for many inline tenants until a new anchor is in place. This means the NOI loss is not just the anchor’s portion, but potentially a sizable chunk of the remaining rent roll as well. In a worst-case scenario, a prolonged anchor vacancy can drive the center’s occupancy and cash flow so low that the Debt Service Coverage Ratio falls below 1.0x, meaning the property’s income isn’t sufficient to cover its debt obligations. Lenders typically require a minimum DSCR of ~1.25× on underwriting, and loan covenants may include triggers or cash sweep mechanisms if DSCR falls below a threshold (often 1.10× or 1.0×). An anchor closure can thus put the loan in jeopardy, forcing the owner to use reserves or inject capital to meet debt service. In extreme cases, we’ve seen properties default on mortgages or enter special servicing following anchor bankruptcies, especially if the center was highly leveraged and reliant on that anchor’s income.

The effect on valuation is twofold: there’s the immediate “as-is” value hit from lower NOI, and there’s the broader market perception of risk. Appraisers valuing a shopping center with a vacant anchor will often do a two-scenario analysis: (1) As-Stabilized Value assuming the space is re-leased at some future rent, minus (2) Lease-Up Costs and Rent Loss to get to that stabilized state. The difference between the original value and today’s value effectively captures the anchor fallout impact. For instance, if a center was worth $50M with a functioning anchor, and the stabilized value (after re-tenanting) might still be $50M (if new rents make up the difference), an appraiser might deduct, say, $5M for downtime and $5M for CapEx/TIs, yielding a current “as-is” value of $40M. In other words, there could be a $10 million value erosion in the short term, even if long-term value can be recovered. This dynamic is often reflected in higher cap rates applied to properties with big vacancies (to account for uncertainty and risk), or simply in buyers heavily discounting offers knowing they have to undertake the re-leasing effort.

Crucially, the valuation impact extends beyond pure math; it influences investor sentiment and DSCR calculations used by lenders. If NOI is temporarily depressed, some loans might breach financial covenants or fail to meet refinance tests until the property is stabilized again. Owners who plan to sell during an anchor transition will likely face offers that price in the worst-case scenario, unless they can sign replacement leases or at least show a credible repositioning plan to buyers. However, once re-stabilized with a new tenant paying higher rent, the asset’s value can rebound or even exceed its prior level (as the rent spread upside kicks in). Many mall and shopping center REITs have highlighted cases where replacing an old low-paying anchor with several new tenants not only recovered lost NOI but grew NOI above the previous level, thus creating value. For example, a former Sears paying $5/sf might be replaced by multiple mid-size tenants collectively paying $15/sf – tripling that space’s revenue and potentially adding millions in value after accounting for the redevelopment cost. The key takeaway is that Retail Tenant Replacement Risk causes interim pain – lower NOI, stressed DSCR, diminished appraised value – but also presents an opportunity for long-term gain if executed well. The prudent asset manager must navigate this dip and communicate effectively with lenders and investors about both the challenges and the eventual upside.

Case Studies of Anchor Fallout

Examining recent case studies helps illustrate the range of outcomes when an anchor tenant falls out:

• Sears / Kmart (Mall and Power Center Anchors): Sears’ slow-motion collapse (culminating in a 2018 Chapter 11) impacted hundreds of anchor locations. Many mall owners actually anticipated and welcomed Sears’ demise, because as noted, Sears and Kmart often paid token rents. Mall REITs like Simon and Macerich aggressively reduced their exposure to Sears prior to bankruptcy and set aside capital for redevelopments. The Sears bankruptcy freed up boxes that landlords could reimagine with higher-paying tenants or new uses. For instance, Simon Property Group reported that replacing Sears in some malls with mixed-use developments (retail, dining, entertainment, even apartments) significantly increased traffic and rents. One striking metric: Kimco Realty recaptured 14 Sears/Kmart leases (0.6% of its rent roll) and projected an average rent increase of ~3× on those spaces. In one redevelopment on Staten Island, Kimco razed a Kmart and brought in multiple new tenants, achieving a 727% rent increase over the old lease. However, these successes required patience and investment – redevelopments cost on the order of $10–$15M per anchor and took several years to complete. In some projects, like Macerich’s Kings Plaza in NYC, the spend was much higher (nine figures) to transform a former anchor into a “game-changing” new retail lineup. The Sears case shows that anchor fallout in class-A locations can ultimately be an opportunity to drive performance above pre-fallout levels, albeit with high capital outlays. Conversely, in weaker malls, a Sears closure sometimes left a void that was hard to fill – a number of lower-tier malls saw anchors go dark and struggled to find any retail replacement, accelerating those malls’ decline or conversion to non-retail uses.

• J.C. Penney (Mall Anchor to Mixed-Use Conversion): JCPenney’s 2020 bankruptcy (and earlier waves of store closures) provide another look at anchor replacement. Some JCP stores were in viable malls and have been backfilled by other retailers (e.g. smaller department stores, off-price retailers, or entertainment venues). But a significant trend with JCP (and some Sears boxes too) has been adaptive reuse into non-retail. For example, a vacant JCPenney at a mall in Eden Prairie, MN is slated to be replaced with a mixed-use development including housing and offices. Investors have started purchasing portfolios of JCPenney boxes not for the retail income, but for the underlying land value and redevelopment potential. In a 2025 transaction, 119 JCPenney stores were acquired at a low basis (~$60/sq. ft., ~10% cap rate on existing income) explicitly to land-bank those sites for future projects. This highlights a scenario where anchor fallout leads to property repositioning outside of retail: owners might decide the highest and best use of a huge, underperforming anchor space is to convert it to apartments, a medical campus, a hotel, or other uses that better suit community needs. While such redevelopments can be costly and time-consuming (entitlements, construction, etc.), they can ultimately stabilize a center by diversifying away from struggling retail formats. From a financial perspective, a dark JCP that was paying very low rent (some long-term JCP leases were reportedly at <$5/sq. ft.) can be replaced by a use that generates value in other ways (e.g. selling land for outparcels, earning ground rent from a residential developer, etc.). The J.C. Penney case study teaches owners to think creatively – anchor replacement might not always mean another store; sometimes the best “replacement tenant” is a completely different land use that strengthens the asset’s overall value.

• Bed Bath & Beyond (Open-Air Big Box in Power Centers): The 2023 bankruptcy of Bed Bath & Beyond (and its affiliate buybuy BABY) left over 480 big boxes vacant across the country, mostly in open-air power centers and strip centers. This was a critical test for the open-air retail segment, which had been relatively resilient through COVID-19. The outcome so far has been cautiously optimistic. Landlords moved quickly to re-lease these well-located stores: within two years, over half of the closed Bed Bath & Beyond stores have been re-tenanted or repurposed. Off-price chains (like Burlington, HomeGoods, Ross, and Nordstrom Rack) were among the most aggressive, snapping up dozens of locations. Burlington in particular acquired 64 BBB leases through the bankruptcy auction and later leased additional sites – ultimately opening around 100 new stores in former Bed Bath boxes. Many of Burlington’s most successful stores, the CEO noted, are former sites of bankrupt retailers, showing how one retailer’s failure became another’s opportunity. Beyond retail, some Bed Bath spaces found second lives as entertainment or recreational facilities – for example, multiple empty boxes were converted into indoor pickleball clubs with 9+ courts each.

  
  

  Financially, the Bed Bath & Beyond fallout demonstrated the rent spread and downtime concepts described earlier. Landlords reported new tenants generally paying 20–30% higher rents than Bed Bath & Beyond did, but also acknowledged that it takes at least 12 months on average to refill each store. During that downtime, some center owners had to weather temporary income loss and possibly use reserves to cover any mortgage obligations. Those with loans might have faced short-term DSCR pressure, whereas owners with low leverage or strong balance sheets could focus on the re-leasing without distress. Now that many of these spaces are refilled, the net effect is coming to fruition: a typical Bed Bath might have paid, say, $15/sf in rent; its replacements (like a combination of a discount apparel store and a small grocer) might collectively pay $18–$20/sf. On a 30,000 sf box, that could mean increasing annual rent from $450k to $600k – an excellent outcome if achieved, though offset by the tenant allowances and retrofit costs spent. Some landlords of BBB locations likely had to invest in refitting the stores (e.g. splitting one box into two units, updating the façade for new brand prototypes, etc.), incurring CapEx that will take time to earn back. The Bed Bath & Beyond case underlines how open-air retail centers can be quite resilient in finding new occupants for vacant anchors, especially when overall retail vacancy is low. It also provides a playbook example: diversify the new tenant mix (don’t just seek one like-for-like replacement), consider non-traditional uses to fill space (pickleball, gyms, entertainment), and be prepared to offer competitive terms to desirable tenants who can backfill quickly.

  
  

Anchor Fallout Playbook: Strategies for Mitigation

Facing an anchor tenant loss can be daunting, but investors and developers can employ a strategic “Anchor Fallout Playbook” to manage Retail Tenant Replacement Risk effectively. Below are key steps and considerations drawn from industry best practices and the analysis above:

1. Proactive Lease Clauses and Tenant Mix: Prevention is the best cure. When negotiating leases initially, try to limit co-tenancy exposure – for instance, avoid tying too many inline tenants to a single anchor, or include provisions that allow substitute anchors to satisfy co-tenancy requirements. Diversify anchor uses if possible (e.g. a center with two different anchor types is less vulnerable than one with a single large anchor). If an anchor shows signs of trouble (declining sales, credit issues), proactively approach strong replacement candidates even before the space is vacant to shorten downtime.

2. Financial Reserves and Contingency Planning: Treat anchor vacancies as an inevitability over a long hold period and maintain reserves for downtime and CapEx. Lenders and owners should underwrite an anchor loss scenario (many do so with a hypothetical 12+ month downtime and retenanting cost built into models). By setting aside capital or securing financing availability (like a line of credit or TI/CapEx facility) in advance, an owner can cushion the blow to DSCR and fund necessary improvements without scrambling. This also reassures lenders – demonstrating that a plan is in place to preserve loan payments even if NOI temporarily drops.

3. Swift Interim Management: When an anchor does go dark, move quickly to mitigate the visual and economic impact. Secure the site (for safety), keep the lights on and the space well-maintained to avoid blight that could further deter shoppers. In some cases, consider temporary “pop-up” uses or short-term leases to generate some income and maintain foot traffic – for example, seasonal retailers, local markets, or community events can use portions of a vacant anchor space. This can offset some carrying costs and signal that the center is still active, buying time for permanent solutions.

4. Aggressive Marketing and Repositioning Strategy: Cast a wide net for replacement tenants. Market the anchor space not only to traditional retailers but also to non-retail users (entertainment venues, medical facilities, educational institutions, municipal offices, self-storage, churches, etc. – whatever the zoning will allow). Sometimes the highest bidder for a large space isn’t a store at all. Be willing to reposition the asset’s concept: for instance, converting an enclosed mall anchor into an open-air format or mixed-use wing if that’s what the market supports. Engaging experienced architects and planners for redesign concepts can help attract new types of users. Also, leverage the trend of experiential and service-oriented tenants that thrive on large spaces (gyms, trampoline parks, grocery/food halls, coworking, etc.). The goal is to future-proof the anchor space by aligning it with current demand.

5. Negotiation of Co-Tenancy and Rent Relief: Open communication with inline tenants is vital once an anchor falls out. Rather than automatically suffering co-tenancy rent hits, try to negotiate alternatives. As noted in industry reports, some landlords have successfully bargained with tenants: offering temporary rent relief or other incentives in exchange for waiving co-tenancy clauses. If you can keep your smaller tenants in place (and paying something) during the anchor downtime, it preserves the center’s occupancy and cash flow stability. Many retailers will be amenable to a deal that helps them stay (especially if their sales are still decent without the anchor) – they may prefer a rent reduction over the hassle of relocating. This tactic can stop the downward spiral of an anchor closure leading to mass tenant exodus.

6. Financial Reforecasting and Lender Engagement: Revisit your DSCR and NOI projections under new assumptions. It’s prudent to create a revised cash flow forecast accounting for X months of anchor downtime, Y dollars of re-leasing cost, and the eventual stabilized income at (perhaps) a different rent. This “with/without anchor” scenario analysis feeds into decisions like: Do we need a bridge loan or additional capital? Will our DSCR drop below covenant levels, and if so, can we get a temporary waiver from the lender? Proactively engage lenders or equity partners with a clear business plan for the vacant anchor space. If you demonstrate the upside (e.g. “we plan to invest $5M to split the old big-box into three units and already have LOIs from tenants that would bring in 25% higher total rent than before”), financiers are more likely to work with you through the transition. Communication and transparency can preserve trust and avoid panic moves, such as the lender declaring a default due to technical covenant breaches. In some cases, owners might even refinance or bring in new investors to fund the repositioning, effectively turning a challenged property into a value-add project with fresh capital.

7. Assess Long-Term Asset Strategy: Finally, use the anchor’s departure as an inflection point to reassess the asset’s long-term strategy. Ask tough questions: Is the property’s highest and best use still as a retail center? Or is this an opportunity to redevelop into something else (as we saw with some JCPenney and Sears sites)? Sometimes the optimal play is to downsize retail space and use excess land or building area for alternative revenue streams. If the market analysis suggests that filling the anchor with any retailer will be extremely difficult (due to location, demographics, competition, or e-commerce trends), it might be wise to pivot – perhaps adding apartments on-site, or converting the anchor box to self-storage or a last-mile logistics hub. These conversions can stabilize income and even raise the property’s value in the face of secular retail headwinds. The Anchor Fallout Playbook thus isn’t just about plugging a hole with another store; it’s about holistically strengthening the asset’s resilience and income profile for the future.

By following this playbook – anticipating anchor risks, maintaining financial flexibility, moving quickly to re-lease or repurpose space, and creatively reimagining the tenant mix – retail center owners can survive an anchor tenant closure and come out the other side with a stronger property. Yes, the road can be bumpy: expect a dent in NOI and value in the interim, and be prepared to invest capital. But as the case studies show, an anchor’s exit, while challenging, can ultimately catalyze positive change: higher rents, modernized spaces, and new uses that keep a retail property relevant in a changing market. In the evolving landscape of U.S. retail real estate, mastering Retail Tenant Replacement Risk is now an essential skill – and with the right strategies, landlords can turn “anchor fallout” from a crisis into an opportunity.

Sources: 

• Retail industry publications, REIT earnings reports, and expert commentary were used to ensure accuracy and currency of data.

• Key insights were drawn from ICSC and Wall Street Journal reports on post-bankruptcy re-leasing trends.

• Reuters analysis of REIT strategies for replacing Sears/Kmart anchors and case-specific details from industry news and research (WealthManagement, Northmarq, etc.) on co-tenancy clauses and redevelopment costs.

These sources and case studies (Sears, JCPenney, Bed Bath & Beyond) provide a grounded, real-world basis for the strategies outlined in this playbook.