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Shopping Centre Leasing Tips for a Better Tenant Mix

When you as a retail leasing agent are to lease a retail property, the terms and conditions of the negotiation will involve more things than a standard office or industrial property to lease.  That is because the typical retail business will have factors of trade and opportunity to consider.

The typical tenant will want to know all the factors of the property before the lease negotiation will become real and relevant.

You will need to tell them about the ‘big’ property issues that impact a retail tenant including:

  • How the property operates and how it is maintained
  • The prevailing vacancy factor in the property and how it is likely to change
  • The profiles and trade of the existing tenants (suitably generalised for confidentiality)
  • Who the landlord is and what their targets are
  • How the anchor tenant (or tenants) benefits the property
  • How the existing tenants specialise and attract customers to the property
  • What the levels of asking rent and outgoings are for the property
  • Where the competing properties are and how they impact your property in the sense of trade and customers

Could a poorly managed retail property with a landlord that is income focused, ‘wreck’ a retail shopping centre tenant mix?  The answer is certainly ‘yes’.   Some landlords do not have a real appreciation of the retail trade process and priorities.   Retail property investment, leasing, and management are really special parts of the property industry; they are not for ‘first time’ investors.

As a specialist retail leasing agent you could find some ‘retail landlords’ are quite inexperienced when it comes to the performance of a retail property.  If the landlord or property investor has just ‘graduated’ from industrial or office property investment, they will require some education when it comes to the dynamics and functions of a retail property.

Links and Relationships

In retail property, everything is linked, and a weak link in the chain of relationships can threaten the success of the property.  Here are some of those relationships.

  1. The anchor tenant attracts customers to the property.  What are the intentions of the anchor tenant?  How are they trading now?  How do they interact with the specialty tenants?
  2. The speciality tenants support and grow the attractive nature of the retail property to the customer base.  Are those speciality tenants successful now?  Are there any problems in the tenant mix that should be addressed?
  3. Has a customer survey been done for the property and what are the factors of property function that were identified?
  4. The trade or success of the tenants will underpin the level and sustainability of the market rental for the property.  The landlord for the property should encourage the property profile and marketing processes so the tenants can be successful.
  5. The well managed outgoings for the property are a part of the tenants occupancy cost.  The outgoings should support sustained successful trade and not become a burden on a struggling tenant mix.
  6. Is the property marketed into the local customer base and demographic?  If so, is that process successful and should it be reviewed?
  7. How the property is maintained now, and is there any need for property change or upgrade?  That will include expansion, contraction, and refurbishment.

The proprietor of the business entering the property as a tenant is going to need to understand the functions of the property, the landlord, and the customer factors of the local area.   Shopping centres are very unique, and the way they are managed and operated will have a great impact on the customer base and the tenant mix.

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Retail Centre Managers – Tips for Improving Shopping Centre Performance

Retail property performance is a fine balance of a number of relationships between the tenants, the landlord, and the community.  When the balance is correctly established and maintained you can see the retail property and the tenants thrive.

In pressured times like that of today where retail trade is impacted by the internet and economic sentiment, the retail property manager has to be very close to a number of key issues in their managed property.  In that way they can stave off many of the problems that can occur with the property over time.

Here are some factors to monitor and address:

  1. Tenants with lower levels of stock should be observed and questioned.  The lower levels of stock may be the result of a recent stocktake sale, or they can be the result of a shift in sales results.  You are looking for tenants that are not performing well in sales or that are changing their service or product offering to that which is not permitted under the terms of the lease.
  2. Changes to the staffing of tenancies and businesses will be an indicator.  If the employees in the tenancy business are under constant change, it is wise to understand what is going on and why it is happening.
  3. Tenants that need to relocate should be worked with.  If their business is under pressure, it is better to achieve a process of cooperation to help them in stabilising.  Any alternative is likely to involve a protracted vacancy and that is not going to help anyone.
  4. Tenants that do not maintain presentation of premises or stock will drag down the other tenants in close proximity.  Quality lighting and good levels of presentation are really important in retail property.
  5. Clustering advantages or pressures in a property can help you either way when it comes to sales and tenant mix.  Look for the tenants that can build sales from each other.  Build clusters of tenants that work for you.  The results will be a stronger market rent.
  6. Anchor tenant weakness or trade problems should be addressed quickly.  Any customer perceived weakness in the anchor tenant will soon reflect in a property decline in sales.
  7. Lower levels of sales in the property or with some tenants will be a concern.  The sales in the property should be tracked by tenant and by tenant category; in this way you will see how the property and the tenants are tracking in the local community seasonally.
  8. Shifts in customer demographic will produce a change in sales.  Look for those changes and help the tenants to act early.  Profile your community at least once per year and ask the customers what they expect from the property and what they like about it.
  9. New property developments to occur in the local area will detract from your customer base.  Watch out for new properties coming up for sale or lease that shift the balance of supply and demand.
  10. Higher incentives in getting a new tenant to your property will occur from time to time depending on the supply and demand for local retail space.  Be flexible and adaptable when it comes to incentives for new tenants.
  11. Competing properties in the local area can be taking some or all of your trade.  Monitor these other properties frequently and watch for changes in the anchor tenant offering.  If the anchor tenant changes, it is likely to shift the retail balance in the entire local area.
  12. Aggressive landlords that attempt to push the rental of the property too high can threaten the tenant mix stability and the viability of a tenants business to operate.  Tenants will soon spread the word of any difficulty with the landlord, and that can have an impact on the property overall.

A retail property is a special place for shoppers and tenants.  Manage your retail property well and with a base strategy that encourages trade for all concerned.