The next frontier in landlord–tenant partnerships

By : J. David Chapman/December 4, 2025

For years, I’ve encouraged landlords, property managers, and real estate investors to think of their relationship with tenants as a true partnership. The logic is simple: landlords only succeed when their tenants succeed. If a business can’t pay rent, the property fails, so aligning incentives is not just considerate, it’s strategic.

Retail has long used this logic through percentage-rent leases, where landlords receive a small portion of a tenant’s gross sales on top of base rent. These agreements make sense because a landlord’s efforts through marketing, tenant mix, and property upkeep directly influence tenant performance. When the district thrives, everyone benefits.

Recently, though, I’ve noticed a new evolution of this philosophy. Instead of simply tying rent to revenue, some innovative landlords are moving toward taking actual equity stakes in the businesses that occupy their buildings. While this practice isn’t widespread yet, it is emerging in certain pockets of the commercial market, especially retail, food concepts, and entrepreneurial districts.

These arrangements can take several forms. Some involve a joint-venture entity where landlord and tenant share profits. Others offer equity participation with a lower base rent or increased tenant-improvement funding in exchange for a small piece of ownership. There are even versions of “phantom equity,” where landlords don’t hold formal stock but do share in future appreciation or distributions.

It makes me ask, why now? Because the real estate environment is demanding more creativity. Higher interest rates have tightened cash flow. Independent retailers need breathing room to grow. And mixed-use districts rely heavily on small, local tenants who may not have the upfront capital to pay premium rents. For landlords invested in place-making, taking a slice of the tenant’s business aligns incentives even more tightly than traditional percentage rent.

But these deals come with complexity. Valuation, tax implications, exit strategies, liability, and control rights must all be negotiated carefully. Many landlords will understandably decide the risk and extra work outweigh the potential upside.

Still, the idea is worth watching. We may be entering an era where the landlord–tenant relationship looks more like a startup–investor dynamic with shared risks, shared rewards, and shared success.

If the goal is long-term stability and thriving commercial districts, deeper partnerships between those who own the buildings and those who activate them may become one of the most promising tools in the modern real estate toolbox.

J. David Chapman is the chair of finance and professor of real estate at The University of Central Oklahoma (jchapman7@uco.edu).