Understanding Percentage Rent Leases in Retail Real Estate

Aug 01, 2024 • 3 min read

What is a Percentage Rent Lease?

A percentage rent lease is a common agreement in the retail real estate industry, particularly in malls and shopping centers. In this type of lease, tenants pay a base rent plus an additional rent based on a percentage of their gross sales. This percentage usually kicks in after the tenant surpasses a predetermined sales threshold, known as the "breakpoint." For instance, a retailer might pay a fixed monthly rent until their sales exceed $500,000, at which point they begin paying a percentage of any additional sales.

Prevalence and Reporting

Approximately 60% of malls and shopping centers in the United States use percentage rent leases as part of their leasing strategy. This approach aligns the interests of landlords and tenants, as both parties benefit from increased sales. However, the complexity of these agreements requires detailed reporting and transparency. Accurate data on sales and spending are crucial for both tenants and landlords to ensure fair and beneficial arrangements.

Why Choose CenterCheck?

At CenterCheck, we specialize in providing precise location data and analytics on millions of retail businesses across the U.S. Our retail intelligence tools offer valuable insights into sales performance, helping commercial brokers and landlords make informed decisions about percentage rent leases. To see how our data-driven approach can enhance your prospecting strategy, book a demo at www.centercheck.com.