If you are a specialist in retail shopping centre leasing and management, you will understand the importance of retail property appearance and design. Customers like to feel comfortable, safe, and happy as they move around within shopping centres and look for the goods and services that they require.
A good shopping centre experience will encourage immediate sales and repeat business. You really do want your customers coming back to your shopping centre in a regular and ongoing way. The benefits to both the tenants and the landlord are significant over time.
Shopping Center Facts
Consider the following facts:
- A GREAT PROPERTY: A successful shopping centre will attract more customers and tenants in an ongoing way. It is quite easy to see when a shopping centre is trading at successful levels; the customers to a retail property can also interpret and see those issues. When the tenants are successfully trading within the property, the retail sales are likely to reduce both tenant mix volatility and vacancy factors. So the focus here is to make your shopping centre visually successful in every way possible.
- VACANCY CHALLENGES: If you have any vacancies to work with, then do so selectively and professionally. Keep a close eye on your lease expiries coming up and your lease renewals. Negotiate those issues early and directly with the tenants involved. Don’t let vacant shops remain vacant for too long. Put covers and hoardings across vacant shop areas. Put advertising material and marketing material on those holdings. What you want to do here is remove the visual negativity of the vacancy from the property and the customers.
- PROPERTY PRESENTATION: Set some standards within the property relating to retail tenant signage and shop presentation. The signage for retailers should be commonly positioned and designed. Good signage will always help with the level of sales and the customer experience. Signage specifications will maintain the quality and the positioning of that signage.
- VISUAL STANDARDS AND ILLUMINATION: Lighting standards will always help with property presentation and believe it or not sales. Most retail shopping centres today are trading at all hours and on that basis seven days a week. The lighting strategies within the retail property, in the car park, and within tenancies should be suitably specified and maintained. Poor lighting directly reflects in poor retail sales. The lighting within the common areas and within the individual tenant shops should be specified for maximum retail impact and customer safety.
- WHAT CUSTOMERS THINK: Understand the customer experience from the very time that they enter the property. Look at how customers into the car park, how they move through the car park and into the shopping mall or shopping centre. Look at the factors of signage, lighting, security, and common area design. Are the services and amenities of suitable quality to encourage customer use and help them stay longer within the property? If you can extend customer visit time, you can potentially improve the levels of sales across the tenancy mix.
- TENANCY FACTS: On a final note it is worthwhile recommending that you do a full tenancy review and a tenant mix study with any shopping centre on an annual basis. It is a professional service that you can provide to the landlords that you work with. What you want to do here is understand where the threats to the tenancy mix are potentially derailing tenancy sales opportunity and or customer visits. The right tenants chosen for the property will encourage shopping centre success over time. Any weaknesses within the tenancy mix should be resolved or remove over time. Understand what the customers expect and require when it comes to the standard shopping experience. Undertake a customer review all marketing survey on a regular basis so that the tenant mix changes are driven from customer information and tenant mix performance.
- KNOW THE FACTS: Delve into the facts about the property. When you take a serious look at your tenancy mix, you can see the challenges, the strengths, and the weaknesses with the anchor tenants, and the specialty tenants; a full tenancy review should occur each year as part of the property business plan. Split your tenancy mix up into desirable tenants and those that should be removed at the next leasing opportunity. Also look for the missing tenants within the tenancy mix that you can target and find when vacancies arise. Visit other local shopping centres on different days of the week and at different times of the day to see how they are performing from a tenant mix perspective.
So there are plenty of good things that you can do here when it comes to retail property performance and shopping centre tenancy review. Maintain the appearance and the function of your shopping centre so that it can attract the best tenants and for customers.
The activities of customers and tenants are always linked when it comes to shopping centre performance. As the leasing manager and or the property manager, you are the best person to develop effective and direct strategies across those issues. Over time that means you will be help in the property performance and landlord results.
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In managing a commercial or a retail property you will need to watch the critical dates applicable to each lease and each tenant in occupation. Those dates will be relevant to important investment decisions and can have a major impact on property occupancy and rental recovery.
If you manage a large property, the number of leases and the variety of tenants can put pressures on lease management and the monitoring of critical dates. To help with that, you should get the software program to integrate into your property management systems. That software program can track the upcoming lease events and tenant management issues.
Here are some of the critical dates to look for within a lease document. Always read the lease document completely and thoroughly as part of identifying upcoming occupancy issues for both the landlord and the tenant.
- End of lease – The end of the lease is something to be planned for. At least 12 months out from lease expiry make the decisions relating to any occupied area. That means you should have a look at the terms of occupancy currently existing, the potential for renewal, and the existing tenant for relevancy within the tenancy mix.
- Rent review – The prevailing market conditions will have a lot to do with the levels of market rent applicable at rent review time. If the lease stipulates that a market rent review will apply then it is necessary to identify comparable properties and comparable leases. Factual information relating to market rental conditions will allow you to agree on a new lease rental with a tenant in a timely way. Given a tenant’s sensitivity to increasing rent in today’s market, make sure that you have a full awareness of market conditions, lease enquiry, and lease absorption. The vacancy rates in the local area will also have something to do with incentives offered to tenants and rental levels negotiated as part of any new lease or market rent review process.
- Renovation requirements – The renovation of a property or part of a property may be required as part of lease occupancy. That is certainly the case when it comes to leases over the longer term. It is also a common practice when it comes to retail premises and those within shopping centres. With any lease for a term longer than five years, it is wise to include a renovation requirement clause within the lease document. That clause will then have a critical date response by the tenant to ensure that the renovation is undertaken at the right time and in the right way.
- Insurance – Many leases today have important obligations on the landlord and the tenant regards insurance. In reading the lease document you will see obligations for both parties relating to risk management, public liability, and the insurance of the building and premises. Each year that insurance will need to be renewed at an appropriate level; the critical date associated with that renewal is something to be watched and carefully administered. A landlord or a property manager would usually obtain a copy of the insurance cover note at the appropriate time given the critical date nominated within the lease.
- Lease compliance – There are many different situations in a commercial or retail property today that could require lease compliance and response on the part of the tenant or the landlord. To understand those factors, you can read the lease document and extract the necessary dates relating to any event or any situation involving the parties. Take a note of the issue and note the relevant date into your software diary system.
- Documentation – At different times of the year certain documentation may need to be exchanged between the landlord and tenant. As an example you may find that the tenant in occupation should be supplying to the landlord the retail sales figures relating to business turnover. Commonly, and in that situation you can find that the rental charged to the tenant is geared to the level of retail sales. In a shopping centre situation the provision of sales figures by the tenant to the landlord would occur monthly or quarterly to allow for rental adjustments to occur. That is then another example of a critical date linked to occupancy and the lease document.
From these points you can see how the factors of lease compliance and critical dates are so important when it comes to commercial property occupation and property performance. A good property manager or landlord will take the time to completely review all lease documents relating to the tenancy mix and the managed property.
Stay ahead of the critical dates and the upcoming diary events. In that way you will reduce problems within the property and help the property stay on track when it comes to tenant occupancy and rental income for the landlord.
A Retail Shopping Center Manager when compared to others working in our industry is perhaps the busiest person by job type and specialization. The type of retail property and the size of the tenant mix will place a lot of pressures on work load and business processes for the Center Manager. That is why property management fees and support team requirements are significantly higher in retail property when compared to that of office or industrial property.
Can you ‘hack’ the intensity of retail property performance and the specialization that goes with that? If you can, then the retail segment is a good place to work and grow market share.
Let’s look at the average working day for a Shopping Center Manager. They have plenty of things to do, and here are some of the most common:
- Tenant contact – Most tenants in a shopping center are of the smaller and individual type. They thrive when the shopping center is performing well; they struggle when the reverse is the case. For that very reason a good manager will keep in close contact with all the tenants in the tenant mix, and watch the integration of anchor and specialty tenants from a customer and client perspective. They look for the strengths and weaknesses and work with both.
- Marketing – A good shopping center will be comprehensively marketed to the customers and the local demographic. A market budget will certainly help that occur but the money for marketing has to be carefully controlled to the shopping seasons and the activities within the property.
- Competing properties – In any city or suburb it is likely that other landlords and Shopping Center Managers are attempting to draw on any good tenants that they find in other properties. For that reason it pays for a Center Manager to have a tenant retention plan and leasing strategy to help minimize the vacancy factor.
- Tenant mix – A successful tenant mix is one that matches closely the customer requirements and anchor tenants in a property. The larger the shopping center, the more complex the controls and choices become; there are then issues to consider with clustering of tenants, renovation and relocation issues, and market rents.
- Arrears – In the ‘real world’ of shopping center management it is the case that arrears will happen with some tenants from time to time; a lot depends on the success of the property and the permitted use or offering of the tenant. Look for arrears and catch them early before they do too much damage to the property cash flow.
- Lease updates and critical dates – Every lease will have dates to watch. Those dates will be critical from a leasing and rental perspective. If the shopping centre has plenty of tenants to watch, then the critical date management process will be all that more complex.
- Landlord reporting and contact – Some landlords require intense reporting on a daily or weekly basis; the end of month reporting can also be complex and significant. The Center Manager has to fully commit to the landlord reporting and contact process.
- Maintenance and Risk Management – In every property there will be maintenance issues to fix; to do that efficiently the Center Manager should have a reporting and response process to maintenance that takes into account the elements of urgency and damage potential as well as personal injury potential.
- Contractor – Some maintenance contractors are better than others when it comes to maintenance response, prices, skills, and knowledge. It is not unusual for the contractors in a large shopping center to be assessed annually for the services they offer given the demands of the property.
From these things it can easily be seen that the Shopping Center Manager should have very special skills and good business systems.
When a commercial property manager takes on a new lease and property to manage, I usually tell them to spend a good deal of time reading the leases before they form an opinion about the property and the tenant mix.
The fact of the matter is that any and all leases in the one property will be different from each other. Critical dates, definitions, and terms and conditions will all have an impact on the way things are done. If there is to be a lease default by the tenant, the first place to go for information is the lease.
Here are some of the main factors to look for when it comes to handling a dispute and default with a tenant.
- The definition of lease default will be in the lease and it will go on to say exactly when and how you (as the landlord’s property manager) can take action to remedy the breach or default.
- As to when you can take action will be important, as it will have bearing on legal relationships between the parties.
- Look out for the relative legislation or laws that can also impact the lease, the tenant, or the landlord. Sometimes laws will interact with the lease documentation and the default event.
- Who can take action and how will vary depending on the lease. Read it to know what can occur.
- Time for the default notices to be served will be set out in the lease clauses. There may also be factors of ‘time is of the essence’ when it comes to notices between the parties. When in doubt get a good solicitor to advise you based on the existing lease between the parties.
- In most cases the tenant should be given a reasonable chance to remedy the breach. Legal precedents may have an impact on what time frame is acceptable for the remedy to occur.
So all of these are very good reasons to read the lease comprehensively when you first take on a new commercial property or property management client.
When something goes wrong in a property, the first place to go is the lease. Read what it has to say; invariably the answer needed will likely be in the lease.
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Lease administration forms part of the leasing and management services offered to Property Management clients in commercial real estate today. It is a specialised service and has major impact on the property under management.
The real estate agency staff involved in the management and leasing of a commercial or retail property, really do need to know what they are doing when it comes to lease administration. When done well the process will help the landlord client achieve income and tenant benchmarks in the property that would otherwise fall short of expectations.
Why do things in investment properties need to be ‘administered’? The answer is quite simple; the market is constantly changing and expectations of the tenant mix, income, and local area will change. Top agents work ahead of the changes and they know what is going on in all comparable properties.
Here are some factors that you can merge into your lease administration system for your clients.
- Review all leases as a priority. In this way you will know what is coming up with each tenant and occupancy. When you are managing and leasing larger properties, the task is complex. For this reason, any lease review should involve a ‘synopsis’ process where key issues from the document are extracted and noted in an appropriate document and diary system. In this way you can be prepared for the major events well before they happen.
- Check out the rent reviews coming up for each tenant. The market rent reviews will be the hardest to predict and negotiate. Any market rent reviews should be flagged for early attention. You will need some good comparable market rental evidence from the local area and this takes time to locate.
- Options for lease renewal can be a good and a bad thing, depending on the property, the tenant, and the landlord. Leases should have an early window of time where any option that exists can be negotiated and finalised. In high quality shopping centres, the process of giving an option for a further lease term is not desirable; it places far too many limitations on the tenant mix and how the client landlord can work their shop ‘clusters’. As a general rule, any top quality property should not give ‘options’ as a standard offering in any lease negotiation.
- All leases will have factors that need action at some time during the year or the lease term. Typically those things are insurance certificates of currency, rent reviews, options, renovation dates, and make good provisions. Get to know your leases so the critical dates area correctly actioned well in advance.
Attention to detail in lease administration is really important. This means that all actions and correspondence should be correctly recorded and implemented. All of this action should be supported by a good property management and leasing fee.