Which type of lease agreement is commonly used for retail properties?

A percentage lease is commonly used for retail properties because it allows landlords to receive a base rent plus a percentage of the tenant's sales revenue. This arrangement aligns the interests of both the landlord and tenant, as it encourages the tenant to increase sales, ultimately benefiting both parties. Retail properties often engage in this type of lease to enable businesses to manage their fixed costs while allowing landlords to capitalize on the tenant's success.

In the context of retail, this type of agreement can be very advantageous during periods of fluctuating sales, as it can lower the risk for tenants when business is slow. Retailers are often more willing to accept a percentage lease structure as it ties their rent to their actual sales performance, thus providing a more manageable financial obligation.

This leasing style contrasts with gross leases, where the landlord covers all operating expenses; net leases, where tenants pay a portion of expenses in addition to rent; and flat leases, which involve a fixed rent amount regardless of sales. Each of these alternatives has its own context and use, but for retail properties, the percentage lease is particularly well-suited due to the dynamic nature of retail sales and the alignment of landlord and tenant interests.