Any shopping centre today can be a challenging asset from a performance perspective. There are many challenges to track, balance, and manage. The skills of the property manager and or leasing manager applied to the task will be critical to asset performance.
Fees for services
It should also be said that the fees to manage any retail property are also usually higher than the fees charged within industrial or office property management. The skills of the people deployed on the property will reflect on the asset outcomes, so you must employ the right people for the task.
Good quality people with the retail experience will cost more from a salary perspective. The property outgoings should (subject to local retail leasing laws and regulations) be structured through the leases for management fees and staff salary recovery.
Taking on a new property?
If you are taking on the management of a shopping centre from a previous owner or previous property manager, there are many things to look at immediately and specifically. Getting things under control quickly should be a priority with a retail asset. You can use a checklist for that process. Here are 4 specific ideas to help you get started:
- Arrears – Let’s start at the money or rental end of property performance. Understand where the rental arrears are and why they are happening. Separate strategies will be required to get those things controlled.
- Vacancies – What and where are the vacancies now in the property and how are they impacting customer and tenant outcomes? Look at filling the vacancies quickly even if you must do short term rentals at lower base rents.
- Tenants and tenant mix – Assess the tenants in the property for current issues and volatility. A weak tenant mix will drag down property performance. Talk to the tenants and ask about customer sales and customer requirements. It is very likely that the tenants will know what is needed in a retail property to resolve shop placement and mix problems.
- Income and expenditure – Review the cash flow results for the property over the last 12 months. You will see the timing factors from high cost issues such as rates and taxes, as well as capital expense items. Then look at current rental levels, vacancy factors, and upcoming rent reviews. From these things you can create a budget for the property. The object here is for you to comprehensively control the money coming into the property and flowing out to the various stakeholders. You can then shape the financial factors of the property in a controlled way into the future.
These 4 factors will lead to greater property understanding and control. When you can see what is happening in the retail property or shopping center, you have something that you can base your future strategies around.