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Renovation Strategies for Retail Shopping Centers Today

A retail shopping center is a business within itself.  It is a cash flow produced from the tenancy mix and the customers to the property.  The shopping center manager and or shopping center leasing manager should be well versed when it comes to optimizing the performance of the property.

A successful shopping center is a fine balance or equation when it comes to the following issues:

  • The rental for the property produced from the existing leases
  • The minimization of vacancies across the property given the existing tenancy mix
  • Market rent reviews that are negotiated as part of ongoing occupancy
  • Lease renewals with the high value tenants that you have chosen within the mix
  • Stabilization of anchor tenants and their interaction with other tenants across the property
  • The renovation and refurbishment strategies that apply to the common areas, tenancies, and exterior building.

With a focus on the last point in this list, you can easily be seen that renovation and refurbishment is a critical component of retail property performance.  The wear and tear factor that applies to a retail shopping center is much higher than a commercial or office building.  This then says that the shopping center needs to be carefully managed when it comes to appearance, renovation, and the overall shopping experience.

People shop for just two or three reasons.  Those reasons are:

  1. Requirements for their necessities of food, convenience, and clothing
  2. A feel good experience when it comes to buying the discretionary items of life
  3. Goods and services required to replace worn out items

A shopping center therefore has to have a mixture of tenants that satisfy all three needs.  The tenancy mix within a retail property is therefore critical to ongoing customer interest.  A retail property without customers will die very quickly.

Taking all of these things into account, the renovation strategy that you adopt for the Retail Property should be woven into the intentions of the tenancy mix, lease renewals, new tenants, and customer spending patterns.  Here are some rules to the process:

  1. There will be better times of the year to renovate the property.  Understand the patterns of the shopper as they apply to shopping throughout the year.  These patterns will help you understand the best times to undertake renovation.  It may be that renovation is only partially undertaken in different zones of the property as the year progresses.
  2. Prior to any renovation commencing, communicate the fact to the broader customer community and tenants.  Let them know what is going on.  Send flyers through the tenant customer sales activity, as well as the local mailing distribution lists.
  3. The renovation of the tenancy should be well publicized and well marketed.  If you know the replacement tenant to move into the renovated area, put that information on to the surrounding billboards and protective hoardings.
  4. As part of refurbishment, you may wish to change the size of tenancies and or the type of tenancies.  This therefore becomes part of the overall business plan for the property.  Plan the clustering is of tenants around particular zones and traffic areas.  Take special care when it comes to the entrance ways to the property given the image that renovation and refurbishment can have at the entrance way.
  5. It is normal for a landlord to justify the renovation of a property based on increased return.  That return will normally come from an improvement in market rental.  Market rental will only increase if you create more tenancies, renovate on a rising market, or bring new tenancies into the property that are of high quality and cash flow.  Be very careful when it comes to the expectations of tenant and income profiles over the coming financial period after innovation.  Many a landlord has made a mistake when it comes to income expectations.

All of this then says that the renovation or refurbishment can occur providing you balance the tenants, customers, leases, and seasonal sale patterns to the renovation requirement.  Plan the process, and everything should do quite well.

You can get more tips like this in our Newsletter.

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Cultivate Your Retail Tenant Mix for Shopping Centre Performance

In retail shopping centre leasing, every tenant shop and every property vacancy should be leased to a plan.  That plan is your tenant mix strategy.  All good retail properties and shopping centres all have a base plan of this nature.  They know what tenant they want in what location, and over the years they shape the property performance and rental return in this way.  It is called tenant optimisation and forms part of the ‘tenant retention plan’ for the property.

The tenant mix plan should be part of the retail property business plan and that should be updated annually.  Plans of this nature help you steer the property performance for the landlord.  A plan of this type is even more important today as some retailers suffer the pressures of the internet and a shift in sales to online.

Key Factors

A good tenant mix formula for a retail property will involve a number of key factors that underpin the landlords leasing decisions.  Here are some tips to help you structure a good tenant plan for your retail property today.

  1. Understand your base property and its position in the eyes of the existing customers.  Why do they come to the property today?  What would they like to see changed in the property and why?  How often do they come to the property now and on what days of the week?  Questions like this will help you formulate a leasing plan.
  2. Shoppers want convenience and a correct retail offering to suit their buying needs.  Convenience means many things when it comes to a retail property however one thing that is high on the agenda for most shopping centres is the car park.  Shoppers need to feel safe and comfortable in using the car park.  It is perhaps the one main thing that can influence future sales and trade for the tenants.  Make your car park easy to use and access.  That will include the entrance and exit points to and from the car park and into the surrounding main roads.
  3. You are likely to have an anchor tenant in your property.  Perhaps you have more than one anchor tenant.  Stay close to these tenants as they will have a good feel for customer buying patterns and current levels of sales.  They will bring customers to the property, and they should help the trading levels of the specialty tenants in the property.
  4. Look at your entrance ways to the property and the shopping mall.  What tenants do you have at the entrance ways and are they the right tenants for those locations?  Generally speaking you should have smaller tenants at the entrances to create impulse buying.
  5. Some entrances to the property will be more active than others.  Look at the relationships to public transport drop off points and taxis outside those entrance ways.  The entrance points to the property create customer movement patterns and places where people will congregate.
  6. Ensure that the common areas in the property provide comfort and satisfy the needs of the customers and shoppers.  Do everything you can to get the customer to spend longer times in the property for shopping and browsing.

To review your property tenant mix, you really should adjust your vision to that of the customer.  Take a trip to the property at various times of the week and experience the retail shopping centre from the customer perspective.

Make notes of the things that you see and how the property functions for the tenants and the customers on each day of the week.  What are the pressure times when it comes to property use and shopper visits?

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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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Signboards are Critical to Commercial Real Estate Agents and Property Promotion

If you are starting a commercial real estate business or perhaps you are to be working in one as a salesperson, the key to building brand and identity is in getting lots of signboards into your territory and onto the best listings.  Your name is everything when it comes to finding and converting the business.  People must know you as a local property expert; signboards give that perception.

Whilst this may seem a bit obvious, the fact of the matter is that it is largely overlooked as a base strategy in building market share.

Signboards on property listings are the cheapest form of advertising, and yet the most effective in your local area.  Given that most of your sales and leasing deals will come from your local area, the signboards are really important.

So what can you do to start a signboard strategy?  Try some of these:

  1. When you get an exclusive listing, make sure that you also get vendor paid advertising and place a very good signboard on the property.
  2. Target the quality properties in your area that really drive the enquiry.  When you attract the enquiry from the market, you can convert more of the deals.
  3. Look at all the redundant properties in the area that could be prime spots for redevelopment.  Identify the owners and see if a project can be possible in the site.  Project sales and leasing brings massive market dominance over time.
  4. Vacant land in your area should be identified and the owners spoken to.  It is likely that a signboard could be placed on the property.
  5. Any listings with other agents that have been on the market for some time are likely to come up for expiry soon.  Talk to the property owners to see if they are receptive to another agent taking over the listing.
  6. Should you take on ‘open listings’?  It is a hard question to set a fixed answer.  Over time you should eventually avoid open listings as they are largely uncontrollable stock and the clients are hard to work with; essentially they will listen to and work with any agent that spins them a story.  Desperation does not drive your market share.
  7. Maintain your signs with a signage upgrade strategy so that the signs are replaced and freshened up monthly.  In this way they will send a quality message to the local property owners and business proprietors.  There is nothing worse than a faded, neglected, or graffiti covered sign on a property.

Your property market opportunity will be built on solid foundations of action and planning.  Nothing of relevance comes from random focus and action.  Start your planning process and build on the steps that you need to take.

If you want more tips on commercial real estate, you can get them in our Newsletter on this site.