Assume you’re a real estate investor looking for opportunities in the retail sector. In that case, you should consider the tenancy mix of the properties you are considering purchasing or owning.
The tenancy mix combines various types of tenants who occupy a retail property or a shopping centre, such as anchor, speciality, convenience, and service tenants.
The tenancy mix can significantly impact the performance and value of your retail property investment because it affects customer traffic, sales turnover, rental income, vacancy rates, and tenant retention.
Tenant Balance and Diversity
A good tenancy mix is well-balanced, diverse, and complementary. It should cater to the needs and preferences of the target market, offer a variety of products and services, and provide customers with a positive shopping experience.
A good tenancy mix should also align with the vision and strategy of the property owner or manager and reflect current and future retail industry trends.
Some of the benefits of having a good tenancy mix in your retail property or shopping centre are:
1. Attracting Customers
It has the potential to attract more customers and increase foot traffic. A good tenancy mix can appeal to a broader range of customers, encouraging them to visit your property more frequently and for more extended periods. For example, an anchor tenant, such as a supermarket or a department store, can draw customers looking for everyday necessities. In contrast, specialty tenants like fashion boutiques or electronics stores can attract customers seeking specific items or interests. Customers can easily access goods and services by having convenience tenants such as cafes or pharmacies.
2. Boosting Sales
It has the potential to increase sales and revenue. A good tenancy mix can encourage cross-selling and impulse buying among customers by exposing them to complementary products and services.
A service tenant, such as a hair salon or a nail bar, can boost the sales of a speciality tenant, such as a beauty or jewellery store. Customers looking for something extra or special can generate additional revenue for a convenience tenant such as a bakery or florist.
3. Creating Customer Loyalty
It has the potential to increase customer loyalty and satisfaction. Because customers can find everything they need and want in your property, a good tenancy mix can create a loyal customer base and improve customer satisfaction.
For example, an anchor tenant, such as a cinema or a gym, can generate repeat customers who visit your property regularly for entertainment or fitness. In contrast, speciality tenants, such as bookstores or toy stores, can generate loyal customers who visit your property for their hobbies or passions.
Customers can benefit from convenience tenants such as dry cleaners or banks by providing convenience and value-added services that make their lives easier.
4. Creating Investment Stability
It has the potential to reduce risk while also increasing stability. A good tenancy mix can lower the risk of losing tenants or income due to market fluctuations, competition, or other external factors.
A diverse tenancy mix, for example, can protect your property from seasonal variations, economic downturns, or changing consumer preferences because different tenants have varying levels of resilience and adaptability.
A diverse tenancy mix can also keep your property from being overly reliant on one or a few tenants for income generation, as you will have multiple sources of rental income from various types of tenants.
Retail Property Performance Rules
As you can see, having a good tenant mix in your retail property or shopping centre can be critical to the success and profitability of your investment.
As a result, it is essential to plan and manage your tenancy mix carefully, considering factors such as location, demographics, competition, demand, supply, trends, and costs. You should also regularly monitor and review your tenancy mix, adjusting as needed to keep it relevant and appealing to your customers and tenants.
