What Is an Anchor Exclusion in a CAM Lease?

Anchor exclusions are one of the most misunderstood clauses in retail lease documents. Property managers and landlords who don't track them correctly either absorb costs they should be passing through or expose themselves to billing errors that inline tenants can dispute. This page covers how anchor exclusions work, the math behind them, where tracking breaks down, and what lease language to look for.

Why Anchor Tenants Get Exclusions

Large anchor tenants, typically supermarkets, department stores, home improvement retailers, and big-box discounters, occupy anywhere from 30% to 60% of a shopping center's gross leasable area. Their presence is the reason smaller inline tenants want to locate in the center at all. Foot traffic from the anchor drives sales for the surrounding shops. That economic reality gives anchors enormous bargaining power.

When a landlord is trying to fill a center, the anchor's signature on a lease makes every other unit easier to lease. Anchors know this. They use it to negotiate below-market base rents, limited CAM obligations, and flat-fee CAM structures rather than variable pro-rata billing. The anchor exclusion is the mechanical expression of that arrangement: the anchor's square footage comes out of the denominator so its exposure stays fixed while the center's operating costs fluctuate.

This made more sense when anchors were genuinely dominant traffic drivers. As retail has shifted and anchor vacancy rates have increased, the rationale for large exclusions has weakened. But the lease structures were set decades ago and persist in many operating portfolios today.

Sources on this topic include NRTA's CAM Wars analysis, which describes anchor exclusions as among the most negotiated provisions in shopping center leases, and commercial real estate forums where property managers describe tracking anchor contributions as a consistent source of reconciliation errors.

The Math: A Worked Example

Assume a 100,000 SF shopping center. The anchor occupies 40,000 SF. The remaining 60,000 SF is split among inline tenants. Total annual CAM pool: $500,000.

Without the anchor exclusion:

The denominator is the full 100,000 SF. An inline tenant with 6,000 SF has a pro-rata share of 6,000 / 100,000 = 6.0%. That tenant's CAM charge is 6.0% x $500,000 = $30,000.

With the anchor exclusion:

The denominator drops to 60,000 SF (the anchor's 40,000 SF is excluded). The same inline tenant now has a pro-rata share of 6,000 / 60,000 = 10.0%. That tenant's CAM charge is 10.0% x $500,000 = $50,000.

The inline tenant owes $20,000 more annually, not because its space changed or operating costs increased, but because the denominator contracted around it.

Now consider the anchor shortfall. The anchor's true pro-rata share (without the exclusion) would have been 40,000 / 100,000 = 40% of $500,000 = $200,000. If the anchor's lease caps its flat contribution at $120,000, the shortfall is $80,000. Whether the landlord absorbs that $80,000 or distributes it to inline tenants through the exclusion depends entirely on how the lease defines the denominator and who bears the shortfall risk.

In many older retail leases, the landlord absorbs the shortfall. In others, the exclusion mechanism effectively passes it through to inline tenants. The difference can be material: in the example above, inline tenants collectively pay for $80,000 of costs the anchor did not cover. With 10 inline tenants of roughly equal size, each absorbs $8,000 in costs attributable to the anchor shortfall.

What Landlords Get Wrong with Anchor Exclusions

Failing to adjust the denominator. If the reconciliation template uses total building square footage as the denominator without accounting for the anchor exclusion, every inline tenant's share is understated. The landlord ends up absorbing costs it was entitled to recover. This usually happens when the lease was abstracted years ago, the exclusion was noted somewhere in the file but never built into the billing system, and staff turnover removed anyone who remembered the arrangement.

Applying the exclusion inconsistently across years. Reconciliation systems updated mid-cycle sometimes produce one year with the exclusion and the following year without it. Tenants who compare year-over-year CAM statements will notice the swing and ask for an explanation. If the property manager can't explain it, a formal audit request often follows.

Not updating when the anchor goes dark. "Going dark" means the anchor vacates its space but the lease remains in place. The anchor continues paying its fixed CAM contribution (or may have rights to reduce it under vacancy provisions in its lease), but its space is physically empty. The exclusion was justified partly by the traffic the anchor drove. Once the anchor stops operating, that justification disappears, but the exclusion typically continues until the lease ends. Landlords need to track whether the dark anchor's contribution terms change at vacancy and whether any gross-up rights apply to the vacated space.

NRTA's materials on CAM auditing describe anchor exclusion tracking as a consistent finding in portfolio reviews, noting that the error is rarely intentional but often goes undetected for multiple reconciliation cycles.

What to Look for in Your Lease

How This Connects to Pro-Rata Share Calculations

The anchor exclusion is a denominator problem. The pro-rata share formula is simple: tenant square footage divided by the denominator, multiplied by the recoverable expense pool. A wrong denominator produces the wrong share for every inline tenant, not just one. For a detailed walkthrough of how pro-rata shares are calculated and where errors enter the formula, see the pro-rata share calculation guide.

Anchor exclusions also interact with gross-up clauses. When a center has high vacancy among inline tenants, the landlord may gross up variable expenses to reflect full-occupancy costs. If the denominator has already been reduced by the anchor exclusion, applying gross-up on top of that creates a compounding effect on inline tenant charges. The CAM reconciliation overview covers gross-up mechanics in the context of the full reconciliation workflow.