Shop Leasing Factors in Retail Shopping Centre Performance

When you have a retail property to lease, there are some important pieces of information that you will need to build a leasing strategy and any marketing process.  Gather the facts before you take steps towards lease marketing or lease negotiation.

Retail Property performance will vary substantially from location to location and city to city.  It is therefore very hard to compare retail properties in diverse locations.  You must know your market in a comprehensive way.  Here are some tips to help you with gathering the right facts relative to leasing any retail vacancy:

  1. Occupancy costs need to be assessed relative to the vacancy.  Occupancy costs will include rental, outgoings, and other sundry charges that apply to leasing and the vacant space.  Any tenant will question the costs and understand the viability of the business to apply in the location.  Occupancy costs and the ability to make sales will vary by location in the property, and by the type of tenant.  This then says that there is a difference in sales and turnover capability between tenant types; they also have differing profit margins.
  2. New tenants to a property will be concerned with premises location and its proximity to other successful tenants.  That’s where clustering becomes an issue in a retail property.  A cluster of tenants can extend the interest and purchase potential of the shopper.  Understand the adjacent leases and just when they will be expiring.  Is there an intention to find other tenants for those locations?
  3. The anchor tenant or tenants in a property are an important draw card for brining customers to the shopping centre.  The anchor tenant lease should be watched for stability and longevity.
  4. Rental types and market rentals will vary according to location and market interest.  You should check out the rentals and vacancy factors in nearby retail properties.  That will help you understand the factors of attraction that apply to finding any new tenant.
  5. What would you consider as the typical demographic shopper profile for the property?  That shopper profile will impact the tenant mix and choice of tenant.  Choose your tenants wisely.
  6. Improvements in the tenancy area and landlords works may vary subject to the lease negotiation.  Understand what the landlord is prepared to do in the premises to attract a good tenant.
  7. The sales averages for the property or MAT (Moving Annual Turnover) will be of interest to any new potential tenant as will the customer counts for the property.  Get those facts and understand how they can provide leverage in leasing any new vacancy.
  8. Lease incentives could apply to attract a tenant to the property.  Those lease incentives will be impacted by market conditions, other properties, vacancy rates, and current business sentiment.  The lease incentives offered to a new tenant will be different and larger than those offered to a sitting tenant considering a new lease in situ.

So these factors will give you a good start to solve the leasing challenge in the property.  Get the facts together before you start lease marketing and property inspections.

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.