commercial real estate training

Tenant Mix Challenges in Retail Shopping Centre Leasing

The retail property market segment is quite special when it comes to tenant selection and tenant placement.  The right leasing choices need to be made to protect the performance of a shopping center for the landlord and the balance of the tenancy mix.

It is a fact that one poorly selected tenant can drag down the sales and trading activity of other tenants surrounding it.  The tenants chosen for a shopping center should be placed with due regard for the concepts of clustering and sales improvement.

A tenant that is selected for the property should bring benefit to the overall product or service offering, given the existing customer demographic to the property.

Here are some of the larger problems that we strike today when it comes to working with leasing and tenant issues in retail shopping centers:

  1. Keep a close eye on the changes to sales and customer requirements as they apply to the property and the region.  Research your customer frequently.  As part of that process, you should be tracking the competing properties in addition to your own.  Look at the changes that occur with vacancies, tenant placements, and tenancy mix offering.
  2. Any new shopping center introduced into an area will have a major impact on retail trade and customer spending patterns.  For this reason, monitor the activities of any new retail property developments coming into the market.
  3. Given that the customer and consumer sentiment has a direct impact on the sales within a shopping center that can flow through to the landlord’s market rental structure.  If a retail property is struggling due to economic circumstances, then it is wise to establish a tenant retention plan as part of the overall business planning structure for the property.  It is better to keep a good tenant in the property at a reduced rental than experience a lift in vacancy rates which will likely be a harder problem to solve.
  4. Car parking facilities at the shopping center should be convenient, modern, and safe.  If any of these three factors are lacking you will find that the customers will soon locate another property to shop at.
  5. The roads and the transport corridors that feed your property with customers should be convenient and direct.  Work closely with the local council to ensure that road access and customer convenience is maintained.  Signage and exposure will be part of that problem.
  6. Other retail property landlords and leasing executives will be chasing your better tenants to encourage relocation to their property.  Keep in close contact with your tenants to ensure that you are satisfying their occupancy needs, together with issues of expansion and contraction.
  7. There are differences between tenancy types within the mix.  Pay particular attention to the requirements of specialized tenants to complement your anchor tenants.  Track the sales of tenant groups so you can see what segments are successful and those that are not.  Make adjustments where necessary.
  8. The lease for an anchor tenant is likely to be quite long and hopefully secure.  That being said, the anchor tenant needs to integrate quite well into the profiles of the specialized tenants.  The relationships between the two are quite important and will bring in more sales, thereby underpinning rentals.

A retail shopping center should be vibrant, modern, and convenient to encourage customer sales, tenant success, and growth of property income.  To achieve these things the property will also require a marketing campaign to underpin customer awareness and return visits.

You can take all of these issues further and a greater depth depending on the complexity the property, the number of tenants, and the landlord requirements.  Retail is a very special part of the property and real estate agency industry.

By John Highman

John Highman is an International Commercial Real Estate Author, Conference Speaker, and Broadcaster living in Australia, who shares property investment ideas and information to online audiences Worldwide.