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.
You can get more tips about Shopping Center Management and Leasing in our eCourse ‘Snapshot’ right here.
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.
In commercial property management it is easy to fall into the same basic management model with all of your properties and clients. That can be the wrong thing to do, given that most properties have differences and challenges that all need to be adjusted to.
To get a reasonable management fee and keep the client and the property in your brokerage portfolio for a long period of time, it is necessary to produce a high quality service. Set new standards for your brokerage; get known as the ‘brokerage of choice’ when it comes to managing difficult and diverse properties.
Remember these facts:
- Most clients don’t do a very good job themselves in property management, so they need help. They have not got the systems and support tools that most other quality brokerages have.
- Many other property managers are a bit ordinary when it comes to skills and commitment to the task. You can usually do a better job.
- Every negotiated sale or lease is an opportunity for a property management proposal.
To attract new clients and better properties to manage here are some ideas to help you set new standards:
- Understand the client before you do anything else. They don’t just want the property managed; they want it formulated to a plan or a strategy that matches their intentions of holding the property.
- Check out the tenant mix and the leases so you can relate to the strengths and weaknesses in each. The weaknesses will need resolve or removal. Given that some leases can go for some time if not years, you will need a tenant retention plan to help you decide what tenants are going and what are staying.
- Understand the critical dates in the property with all of the leases. Act early on the dates so you are not creating a weakness in the property or income base.
- Vacancies and arrears can be challenging issues. Both require strong and sensible management or resolve. It pays in many cases initially not to remove a tenant because of arrears. Usually the arrears can be managed through hence avoiding a vacancy and loss of rent.
- Understand the income profiles and factors for the property. Match the expenditure trends to the cash flow and the requirements of the landlord. It is not so much that the bills need to be paid on time; but rather that the expenditure needs to be planned.
A good property management system will be supported by a checklist and forward planning model. Every client is different so take the time to understand the client before you do anything else. Help them with their property needs.
If you work in commercial or retail property management, you are likely to be very busy most of the time. That being said, the problem needs to be controlled.
It is interesting to note that many professional property managers over time become quite frustrated with the momentum that they are trying to achieve in portfolio management. The reason for frustration usually centres on their inability to control workload and portfolio requirements. The variables of clients service and portfolio activity place pressures on the working day.
It is worthwhile noting that many property managers are overloaded when it comes to the number of tenants and the number of properties. Perhaps the problem stems from the requirements to satisfy a certain level of fees in each case. If you want to build some efficiency into your property management department and within your career, it is necessary to strike the appropriate fees for the property management tasks involved and the clients concerned.
Here are some tips to help you get your career back on track:
- The role of a property manager is a bit different to that of a sales or leasing executive. A property manager has to control and process a lot of documentary issues, lease negotiations, and matters relating to property performance. That requires paperwork, processes, checking systems, and planning. It is best to get the paperwork done at the beginning of the day between 8 am and 11 am. In devoting 3 hours to intense paperwork, your mind is fresh, and more inclined to deal with the issues.
- One of the biggest errors that is all too common in the industry occurs when the managers are handling emails first thing in the morning. The only reason you should look at emails at the beginning of the day is to see if any urgent issues have arisen overnight. Everything else in the E mail inbox should wait till the later part of the morning or the day. Don’t let the e-mail system divert you from the requirements to get essential paperwork done. Understand your priorities when it comes to property performance, client service, and tenant contact. Some of those things can be shifted and prioritised.
- At the end of every month, the property performance and reporting requirements are extensive and time consuming. It can take many days to compile the necessary property reports for the clients that you serve. Don’t cut corners when it comes to checking reports and the financial information from each portfolio. Take the time to ensure that the records are correct and accurate relative to the tenancy mix, the leases, and the clients instructions.
- Stay on top of tenant leasing issues and the critical dates that apply to every lease document. The best way to do this is to monitor the critical dates at least 18 months out. That then gives you plenty of time to react to the upcoming events.
- Some matters of property management can be quite urgent with maintenance being one of them. Be aware of the maintenance tasks that can involved personal injury and risk. Have an emergency response process to implement when something of a major concern arises within the physical property relative to maintenance.
When a property manager believes that they are in control, the quality of work will be higher, and the clients will be serviced more effectively. There is a big difference between being reactive and proactive when it comes to commercial and retail property management services. The best fees for service come from a professional manager working to the clients property performance plan and targets.
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When you are looking at listing a commercial or retail property for sale, it is important to know what the outgoings are for the property and just how they compare to other properties in the same general location.
There is no point in taking a commercial property to the market if the outgoings require adjustment or analysis. An astute buyer will ask questions of high outgoings and you will need to have your answers ready.
If you specialise in a property type, you will find it easy to relate to outgoings and operational costs in a commercial, industrial, or retail property. Get to know the averages that apply to the properties that you act on in sale or lease.
Here are some categories that apply to the expenditure analysis in commercial property today.
- Council rates for the property will take up a large percentage of the operational costs for the building. They are usually based on a pre-determined value of the property. Check out the rates, when they were last updated for ratings purposes, and compare the rates to similar properties in the same location.
- Water rates will be a charge on the property and there may be extra costs of excess water. Given that water is a critical component of property occupancy, check out what water saving initiatives are active in the property.
- Land tax or similar property ownership tax will be something that could apply to property ownership. The question will be if the tax is a recoverable item under the leases with the tenants.
- Insurance costs for the property can be a recoverable item under the lease. Check out the relationship between the tenants and the landlord when it comes to property insurance and liability.
- Air conditioning and energy consumption are typically high costs in property occupancy. Modern properties will have some energy savings devices and strategies that help with expenditure costs for the tenants. Ask questions about the systems that get to the facts about common energy and tenant consumption of energy.
- Security in a property can be of prime importance to the tenant and the way that they use the property. Understand how the security in the property operates and who pays for that.
- General repairs and maintenance will occur with every property. The fact remains that the costs of this category should compare with other buildings of similar type and size.
- Lifts and escalators will consume a lot of energy in the property as well as contribute to the operational plant and machinery costs.
- Essential services code compliance for such important issues such as fire prevention, air conditioning, and other safety equipment costs should be reviewed to ensure that the property complies with the required codes that apply to its construction and use.
- Capital expenditure should be removed from the operational costs of the building. They are not normally recoverable.
A top agent can work through these figures and determine how they impact the property. This process of checking can help your ability to sell or lease the property.
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When you manage a commercial or retail property, the budgetary process and assessment will be a frequent part of the property performance and monitoring system. An accurate property budget will help you with the overall property performance throughout the year. That being said, the budget that is created for a property needs to be completely accurate and relevant to the local property market.
Here are some tips that can be applied to the compilation of a budget in commercial or retail property management.
- Meet with the landlord of the property before you do anything else. Understand the intentions of the landlord that can have an impact on the property performance. It could be that the landlord intends to sell the property inside the next 12 months. That single factor will have major impact on the compilation of the property budget. Income and expenditure would be handled differently if the property is to be sold verses retained.
- It goes without saying that you should understand the existing tenancy mix and the intentions of the tenants within the property. Meeting with all tenants regularly will help you stay on top of these issues. If a lease is to expire or renew, the cash flow for the property income will need to show those changes.
- Most property budgets are initially prepared on a spreadsheet with due regard to the timing of changes in income and expenditure throughout the year. This then says that the spreadsheet will reflect the monthly changes of property income and property expenditure. You will need to understand the rental escalations, rent reviews, and options as they apply to each lease within the property.
- A good property budget will allow for vacancies to occur in keeping with the prevailing market conditions. Review the local property market to understand the supply and demand of future space in the particular property type. You will also need to set some expectations and assumptions as they apply to the local and regional economy. Part of that process will include an assessment of the local business demographics and expected changes within the community.
- In preparing for a property management budget, look at all the competing properties in the region or general location. Those properties are likely to place pressure on existing vacancies, and prevailing market rentals. An abundance of vacant space in the local area will directly flow through to a reduction in market rental overall, and potentially a similar case in your property.
- The financial history for the property should be gathered for the last two or three years. That history will allow you to understand rental changes, vacancy factors, and expenditure escalations. That information will help you greatly in creating a new property budget.
- A significant part of the expenditure in any commercial or retail property will include uncontrolled outgoings that have a significant impact on property costs. They will normally be in the categories of municipal rates, energy, and insurance. These three factors take up a large percentage of the building outgoings annually. Estimating the escalations in these categories can be difficult so you will firstly need to refer to the appropriate rating bodies, Energy Supply companies, or relevant insurers for an estimate of expenditure change.
- Talk to other property owners and property managers in the local area to compare property outgoings and expenditure costs. Given that the commercial and retail property market is so specialized, the sharing of this information is very common. Without this information it is very hard to compile the property budget.
A commercial or retail property budget is not a difficult thing to compile, however it does take time and a reasonable amount of preparation work. As mentioned earlier, always take notes regards your assumptions as they apply to the budget. During the year you can refer back to your notes when something seems to be out of balance with the property budget.
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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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.