Percentage rent has been a common lease provision for certain retail tenant leases for decades. However, it has been used sparingly during the last fifteen years due to the competition for anchor tenants and the ability of landlords to pass through all operating expenses including common area maintenance costs. Today, only about 10% of retail leases have percentage rent clauses. The percentage rent clause is primarily applied to department store anchor tenants and to smaller satellite jewelry and other higher-margin retail tenants.
The percentage rent clause was typically structured as follows:
1. ABC Department store has a 100,000 square foot store in the USA Mall.
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