Which type of tenant typically uses percentage leases?

Percentage leases are commonly used in retail settings because they allow landlords to receive a portion of a tenant's sales revenue in addition to a base rent. This type of lease structure aligns the interests of both the landlord and tenant since the more successful the tenant's business is, the more revenue the landlord can earn.

In this arrangement, a retailer pays a fixed base rent along with a percentage of their sales that exceed a certain threshold. This incentivizes landlords to support their tenants’ success, as it directly impacts their own income potential. Retail environments benefit from this method as it fosters a mutually beneficial relationship, helping to cover fluctuating sales.

While other types of leases might be more prevalent in manufacturing, residential, or office tenants, they typically rely on fixed rental amounts rather than sharing in revenue. Therefore, the retail context is particularly well-suited for percentage leases, explaining why this is the correct choice in the context of tenant lease types.