A co-tenancy clause lets a tenant pay reduced rent, or even leave, if an anchor tenant closes or center occupancy falls below a set level. A go-dark clause lets a tenant stop operating while continuing to pay rent. Together, they can turn one anchor closure into a chain reaction across a shopping center, which is why buyers should model them before making an offer.
Co-Tenancy vs. Go-Dark: What Each Clause Does
| Clause | Who benefits | Typical trigger | Typical remedy |
|---|---|---|---|
| Opening co-tenancy | Tenant | Named anchor or % of center not open when tenant opens | Delayed rent start or reduced rent until satisfied |
| Operating co-tenancy | Tenant | Anchor closes, or occupancy falls below 70% to 80% | Rent drops to 50% or percentage rent; termination after 6 to 12 months |
| Go-dark right | Tenant | Tenant chooses to stop operating | Tenant keeps paying rent; building sits empty |
| Continuous operation covenant | Landlord | Tenant must operate during set hours | Protects foot traffic; rarely granted by national anchors |
| Recapture right | Landlord | Tenant goes dark for a set period (often 6 to 12 months) | Landlord can terminate the lease and re-let the space |
Worked Example: Modeling the Downside
A 60,000 SF grocery-anchored center produces $900,000 of NOI. Shop tenants make up $520,000 of rent, and leases representing $300,000 of that rent have operating co-tenancy tied to the grocer. If the grocer goes dark and the landlord cannot backfill during the 12-month cure period, those tenants drop to 50% rent.
That drop does not only hurt cash flow. Many loans include cash management triggers tied to DSCR or to the anchor going dark, which can sweep all excess cash to the lender just when you need it for re-leasing.
What to Look For in Due Diligence
- Build a co-tenancy matrix: every tenant, the named anchors or occupancy threshold, the remedy, and the cure period.
- Check whether the anchor owns its own parcel. If it does, you have no control over backfilling it.
- Read the anchor's lease for a go-dark right and whether the landlord has a recapture right once it goes dark.
- Confirm whether a replacement anchor must be a specific type (for example, "a national grocer of at least 40,000 SF"). Narrow definitions make cures much harder.
- Review sales reports for the anchor. Falling sales per square foot is the early warning sign of a future closure.
Frequently Asked Questions
Do single-tenant NNN properties have co-tenancy?
Rarely, but outparcel and pad tenants in larger centers sometimes do. Always check even if the building is freestanding.
Can a landlord negotiate co-tenancy out of a lease?
With national tenants, it is often a question of how narrow it is rather than whether it exists. Push for longer cure periods, broader replacement definitions, and a cap on how long reduced rent can last before the tenant must choose to stay at full rent or leave.
How do lenders treat co-tenancy?
Lenders may underwrite the downside case, reduce proceeds, or add anchor-related cash sweep triggers. Expect questions on any center where an anchor has less than 5 years of term left.
Bottom Line
In multi-tenant retail, an anchor's value is measured by the rent it pays plus the rent it protects. Map every co-tenancy and go-dark provision before you buy, stress test the NOI, and price the center as if the anchor could close.
Educational content only, not legal, tax, or investment advice. Figures in examples are illustrative. Confirm specifics with your attorney, CPA, and lender before acting.