Ancillary tenant is the term used to describe a lessee that does not occupy a significant portion of the property it is renting from, as opposed to anchor tenants.

Ancillary tenants are usually smaller businesses, chain stores, regional offices or franchise restaurants that rent standard-sized lots with shorter term leases within a property.

Due to the relatively less significant amount of space leased, ancillary tenants are usually not able to negotiate for more favourable rentals as compared to anchor tenants. It is thus normal for a property to see constant turnovers of ancillary tenants within a particular property.

A property with a disproportionately large number of ancillary tenants tend to have shorter weighted average lease expiry (WALE) and face higher vacancy risks.

This entry is part of REITsWeek's glossary of REITs and real estate investment terms.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.