Are co-tenancy clauses still common in NYC retail leases in 2026?

Co-tenancy clauses are no longer common in NYC retail leases in 2026. Landlords have largely stopped granting them after getting burned during the 2020 to 2022 period of mass tenant departures. The clauses still appear in two specific cases. First, anchor deals in regional shopping centers outside NYC. Second, very large flagship deals for global brands in mixed-use developments. For mid-format and small-format NYC retail, co-tenancy is effectively dead in 2026.

Why have NYC landlords stopped granting co-tenancy clauses?

NYC landlords have stopped granting co-tenancy clauses for three reasons. The clauses created fragile income during the 2020 to 2022 vacancy wave when anchor tenants closed and triggered multiple tenant rent reductions simultaneously. The credit tenant pool shrunk, giving landlords more leverage in remaining negotiations. F&B and wellness operators who lead 2026 absorption typically do not ask for co-tenancy, making it easier for landlords to refuse the clause across the board.

What can NYC tenants ask for instead of co-tenancy?

NYC tenants who cannot get co-tenancy clauses should ask for two substitutes. First, a sales kickout clause that allows termination if gross sales fall below a defined threshold for two consecutive years. This protects against broader location underperformance without requiring a specific co-tenancy trigger. Second, a relocation or building character clause in mixed-use developments. These alternatives address some of the same risks as co-tenancy and are easier to negotiate in the 2026 lease environment.

What is a sales kickout clause in a NYC retail lease?

A sales kickout clause in a NYC retail lease gives the tenant a termination right if gross sales fall below a defined threshold for a specified period, typically two consecutive years. The clause protects the tenant against the risk that a location simply does not work as expected. The landlord usually negotiates a notice period and a small termination fee. Sales kickouts are increasingly common as substitutes for co-tenancy clauses in NYC retail leases in 2026.

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Industry CommentaryJuly 2, 20264 min read

The Death of the Co-Tenancy Clause in NYC Retail

Co-tenancy clauses used to be standard for credit tenants in NYC retail. Landlords have stopped granting them. Here is why.

Jack Baum·Gravity Realty Group

Co-tenancy clauses used to be standard in NYC retail leases for any credit tenant in a multi-tenant building or a shopping district. Anchor tenants demanded them. Mid-tier operators got them when they had the leverage. In 2026 they are mostly gone. Landlords have stopped granting them.

Here is what changed and what it means.

What a co-tenancy clause does

A co-tenancy clause gives the tenant rent relief or a termination right if certain other tenants in the building or shopping center leave. The classic example is an anchor tenant. A clothing retailer signs a lease in a mall on the condition that the department store anchor stays open. If the anchor closes, the clothing retailer gets a rent reduction or the right to terminate.

In NYC retail, co-tenancy clauses have applied to multi-tenant buildings, retail strips, and mixed-use developments. Tenants used them to manage the risk of buying a location partly on the strength of other operators around them.

Why landlords pushed back

Landlords have always disliked co-tenancy. The clause makes their rent revenue uncertain. One vacancy triggers reduced rent from multiple tenants. A landlord with five co-tenancy clauses in a building has a fragile income stream.

Through 2010 to 2020, when leverage was more balanced, landlords accepted co-tenancy on credit deals because they had to. Tenants would walk if they did not get it.

What changed in 2026

Three things. First, the credit tenant pool shrunk. Fewer national chains are signing new NYC retail leases. The leverage shifted toward landlords with the few credit deals still being done.

Second, F&B and wellness operators do not typically ask for co-tenancy. They are the largest category of new leasing in 2026. The clauses are not even part of the conversation in those deals.

Third, the post-pandemic experience with mass tenant departures made landlords cautious. Co-tenancy clauses became a major issue during 2020 to 2022 when anchor tenants closed. Landlords got burned. They learned. They stopped granting the clause.

Where co-tenancy still applies

Two cases. First, anchor deals in regional shopping centers. Outside NYC proper, in the suburbs and the regional retail, co-tenancy is still negotiated. It is rare in NYC.

Second, large flagship deals for global brands in mixed-use developments. A 10,000 square foot flagship in a new building might still get co-tenancy. The brand has leverage. The landlord wants the brand more than the next tenant. The clause survives.

For mid-format and small-format retail, co-tenancy is gone.

What tenants should ask for instead

If you cannot get co-tenancy, ask for two substitutes.

First, a sales kickout clause. If your gross sales fall below a defined threshold for two consecutive years, you get the right to terminate. This protects against the broader risk of a location not working without requiring a specific co-tenancy trigger.

Second, a relocation clause in mixed-use buildings. If the building changes character significantly, you have negotiated rights. This is rare but worth asking.

The bigger picture

The death of co-tenancy is part of a broader shift in NYC retail lease leverage. Landlords are more cautious. Tenants are more careful about location choice. The lease terms are adapting.

For more on the current lease term environment, see my tenant lease primer.

Frequently asked questions

What is a co-tenancy clause in a retail lease?: A co-tenancy clause in a retail lease gives the tenant rent relief or a termination right if certain other tenants in the building or shopping center leave. The classic example is an anchor tenant. A clothing retailer signs a lease in a mall on the condition that the department store anchor stays open. If the anchor closes, the clothing retailer gets a rent reduction or termination right. Co-tenancy was traditionally common for credit tenants in multi-tenant buildings.
Are co-tenancy clauses still common in NYC retail leases in 2026?: Co-tenancy clauses are no longer common in NYC retail leases in 2026. Landlords have largely stopped granting them after getting burned during the 2020 to 2022 period of mass tenant departures. The clauses still appear in two specific cases. First, anchor deals in regional shopping centers outside NYC. Second, very large flagship deals for global brands in mixed-use developments. For mid-format and small-format NYC retail, co-tenancy is effectively dead in 2026.
Why have NYC landlords stopped granting co-tenancy clauses?: NYC landlords have stopped granting co-tenancy clauses for three reasons. The clauses created fragile income during the 2020 to 2022 vacancy wave when anchor tenants closed and triggered multiple tenant rent reductions simultaneously. The credit tenant pool shrunk, giving landlords more leverage in remaining negotiations. F&B and wellness operators who lead 2026 absorption typically do not ask for co-tenancy, making it easier for landlords to refuse the clause across the board.
What can NYC tenants ask for instead of co-tenancy?: NYC tenants who cannot get co-tenancy clauses should ask for two substitutes. First, a sales kickout clause that allows termination if gross sales fall below a defined threshold for two consecutive years. This protects against broader location underperformance without requiring a specific co-tenancy trigger. Second, a relocation or building character clause in mixed-use developments. These alternatives address some of the same risks as co-tenancy and are easier to negotiate in the 2026 lease environment.
What is a sales kickout clause in a NYC retail lease?: A sales kickout clause in a NYC retail lease gives the tenant a termination right if gross sales fall below a defined threshold for a specified period, typically two consecutive years. The clause protects the tenant against the risk that a location simply does not work as expected. The landlord usually negotiates a notice period and a small termination fee. Sales kickouts are increasingly common as substitutes for co-tenancy clauses in NYC retail leases in 2026.