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How Do I Negotiate Exclusive-Use and Co-Tenancy Clauses?

These are two of the most valuable clauses a retail tenant can win, and most landlords leave them out unless you ask. An exclusive-use clause bars the landlord from leasing other space in the center to a competitor selling your core products or services — protecting your sales from being split.

A co-tenancy clause ties your rent (or your obligation to even open) to the center staying occupied: if the anchor tenant goes dark or occupancy drops below a threshold (commonly 60% to 80%), your rent drops to alternate rent — often 50% of base rent or a percentage-of-sales-only deal — until the center re-fills.

The money move: demand both, define them with hard percentages and named categories, and attach self-help remedies (rent reduction, then termination) so the clause has teeth. A well-drafted co-tenancy clause can save a struggling tenant $3,000 to $20,000+ per month when an anchor closes.

An exclusive-use clause can protect 15% to 40% of revenue that a same-category competitor would otherwise siphon off.

Exclusive-Use: Lock Out Your Competitors

An exclusive-use clause is your moat. Without it, the landlord can put a direct competitor three doors down and cut your sales in half. With it, you are the only operator in the center allowed to sell your protected category.

What to demand:

• A precise category definition. "Sale of coffee and espresso beverages as a primary use" is enforceable. "Coffee shop" is not — a competitor will call itself a "bakery that also serves coffee." Pin the language to products and revenue share (e.g., any tenant deriving more than 15% of gross sales from your protected category).
• Coverage of the whole center, including outparcels and pad sites, not just the inline shops.
• Landlord enforcement obligation. The landlord must actively enforce against violators, with a cure period and then your remedies (rent reduction or termination) if they fail.
• Carve-outs you can live with. Landlords will protect existing tenants and national anchors. Get the carve-out list named specifically — never "and similar uses."

The trap: a vague exclusive is worse than none, because it gives you false comfort. Spend the legal dollars to make the definition airtight.

Co-Tenancy: Don't Pay Full Rent for an Empty Center

Co-tenancy protects you from the landlord's failure to keep the center alive. There are two flavors, and you want both:

1. Opening co-tenancy. You are not obligated to open (or to pay rent) until the anchor and a minimum percentage of inline space are open and operating. Protects you from opening into a ghost town.
2. Ongoing co-tenancy. If the anchor goes dark or occupancy falls below your threshold for more than 30 to 60 days, your rent converts to alternate rent.

Define the trigger with numbers:

• Named anchor(s): list the specific anchor by name (e.g., the grocery or big-box that drives your traffic). "An anchor of comparable quality" is a loophole — landlords will backfill with a discount tenant.
• Occupancy threshold: typically occupancy below 70% to 80% of leasable area, OR loss of the named anchor.
• Alternate rent: commonly 50% of base rent, or the lesser of base rent or a percentage of gross sales (e.g., 5% to 8% of sales).
• Cure window: landlord gets 9 to 12 months to re-tenant before your termination right kicks in.

The Remedies That Give These Clauses Teeth

A clause with no remedy is decoration. Stack the consequences so the landlord is motivated to keep the center full and competitor-free:

• Step 1 — Rent reduction. Automatic drop to alternate rent the moment the trigger hits.
• Step 2 — Continued reduction. Reduced rent persists for the full cure period (9–12 months).
• Step 3 — Termination. If the trigger is not cured, you may terminate with no penalty and recover unamortized buildout in some negotiated deals.
• Step 4 — Damages for exclusive breach. If the landlord lets a competitor in, you get rent abatement plus, in strong leases, the right to injunctive relief to force the competitor out.

Push for the reductions to be self-executing — you simply pay less, and the landlord must sue to dispute it. That flips the leverage: the burden is on them, not you.

Common Mistakes That Gut These Clauses

• Accepting "comparable anchor" language. Always name the anchor. A backfilled dollar store is not the grocery that drew your customers.
• Vague exclusive categories. "Restaurant" or "apparel" invites competitors to claim a different label. Tie it to percentage of sales from named products.
• No termination backstop. A rent reduction alone can trap you in a dying center for years. Always negotiate the walk-away right.
• Ignoring percentage rent interaction. If you pay percentage rent, co-tenancy alternate rent should suspend or reduce it too — otherwise a dead center still costs you on the upside.
• Forgetting the buildout. When you can terminate, fight to recover unamortized tenant improvements so a landlord failure does not strand your $/sq ft investment.

Brokers at CBRE, JLL, and Cushman & Wakefield treat co-tenancy and exclusive-use as the two clauses where a strong tenant-rep broker earns their entire fee — the dollars saved when an anchor closes routinely exceed the cost of the lease negotiation many times over.

FAQ

What's the difference between exclusive-use and co-tenancy? Exclusive-use keeps competitors out of the center so your sales aren't split. Co-tenancy reduces your rent or lets you leave if the center loses its anchor or drops below an occupancy threshold. One protects revenue; the other protects you from paying full rent in a failing center.

Negotiate both.

What is a typical co-tenancy rent reduction? A common structure is alternate rent at 50% of base rent, or the lesser of base rent or 5% to 8% of gross sales, lasting until the center re-tenants or the cure period (9 to 12 months) expires — after which you can terminate.

Will a landlord actually agree to these clauses? Larger, well-capitalized tenants and credit tenants get them routinely. Small tenants get them less often, but a good tenant-rep broker can win at least a scaled-down version — especially in a soft market or a center with vacancy the landlord needs to fill.

How do I make sure the exclusive-use clause is enforceable? Define the protected category by specific products and a percentage-of-sales threshold, cover the entire center including outparcels, require the landlord to enforce, and attach remedies (rent abatement, injunction, termination) if a competitor slips in.

Vague category language is the number-one reason these clauses fail.