In this property market, retail leasing is quite special. It can be extremely rewarding from a leasing commission perspective, however it does require the right knowledge and the right person to attract the correct levels of business.
Given that the current property market is somewhat frustrating and slow, many retail tenants are quite critical of the properties in which they are located. The relationship between the tenant and the landlord is critical to tenant retention and vacancy minimization.
It is interesting to note that many landlords managing their own properties tend to cut corners when it comes to maintenance within the property. The landlords in that case are too close to the function of the property to make clear and sensible decisions when it comes to property maintenance and property performance. They tend to look at the bottom line before they look at maintaining customer comfort and tenant performance.
A retail property is a careful balance between the landlord, the tenants, and the property manager. In many respects, the interaction has to work very positively.
Here are some skills required of a retail leasing specialist today:
- Get to know the local businesses throughout your region. Visit the competing properties to see what their tenant mix and property profile is doing.
- Market rentals will change from time to time. The pressures of supply and demand will shift the market rental throughout the year. This then says that you need to be very familiar with the current rental trends.
- Incentives for leasing will come and go from the property market based on the levels of enquiry and the amount of vacancy. Lookout for those property developments that could throw imbalance into the property market.
- A good leasing specialist will have an extensive database. Within that database you will have a significant number of local business proprietors, franchise groups, and landlords. Constant contact within those groups will help you identify future leasing needs and opportunities.
- Successful tenant occupancy will occur from a well-chosen tenant placed in a good property and tenancy mix. This then says that the tenant should be well chosen for the property and leasing placement. Every vacancy should be looked at from the larger perspective of the property and the overall tenancy mix.
Retail leasing is a very rewarding part of the industry; that being said, it does require that special effort and knowledge on the part of the individual leasing specialist. You can succeed in this part of the industry through deliberate focus and skillful marketing.
When it comes to leasing and managing a retail property today, the tenant mix is critical to the income that you create. Without a successful tenant mix, the investment performance for the property owner will be difficult to achieve.
In a retail property today, there are just so many things to be carefully balanced; that is because of the prevailing economic conditions and the property market pressures locally. At this current time and in most locations, it can be difficult to find the right tenants to fill vacancies. It is also hard to keep the tenants in the property.
For this very reason, a tenant retention plan and a vacancy leasing strategy should be adopted by all agents in serving their clients. These elements should form part of the business plan for every investment property under management. Top clients need a top property management and leasing service, and that is what this process can do.
All of this being said, as professional commercial and retail property leasing experts and property managers, it is up to us to bring the required experience and knowledge to the landlords that we serve. Special skills are required when it comes to tenancy analysis, and tenancy mix strategy. These special skills also command a fair and reasonable fee for service. Discounts do not apply for a top service in our industry!
The placement of a tenant is simply not a matter of just leasing, negotiating, and occupancy creation. It is a matter of finding the right tenant for the right property, and matching the lease back to the requirements of the landlord’s investment strategies. The age of the property will also have some influence on the leasing process given the requirements of refurbishment and tenancy relocation.
Here are some factors to merge into your property leasing strategy and tenancy mix.
- Get to know all of the tenants in the particular subject property. A close working relationship with them will help you identify any pressures of occupancy or rental payment. With the property market today, as difficult as it currently is, it is better to retain tenants in occupancy through good lease management procedures, than to lose them to another property where incentives or rental adjustments may be more attractive and the landlord is more flexible. Understand that many other real estate agents will be chasing your tenants as a natural course of business. Your property package needs to be competitive in the local property market.
- The factors of supply and demand will apply to your property type and the local area. Those factors will also influence market rentals, incentives, and vacancy factors. Every landlord needs to be updated regards the trends of the local property market so that sensible leasing decisions can be achieved. An extended vacancy and loss of rent is far more damaging to a property than a startup lease with a lower rental.
- Check out all of the major properties locally that could be considered as competitors to your subject property. Review their tenancy mix and vacancy factors. Look for the strengths and weaknesses that apply to each particular property. If possible, get details of the current market rentals and the upcoming vacancies in each property. With this information, you can influence some of those tenants towards your landlord’s property.
A very skillful commercial or retail leasing expert knows how to balance all of these things for the clients that they serve. Create a tenant retention plan and a tenant communication strategy to strengthen the overall lease profile of the property for the landlord. That is what leasing and property management is all about. In one word you could say it is the creation of ‘stability’.
If you want more tips on tenant mix and tenant retention, you can get them at our main website http://commercial-realestate-training.com/
In retail property performance, the trade of the shopping centre will be impacted by the marketing plan. For this reason you really do need to establish a marketing plan soon in the management and leasing of a property.
The marketing plan and effort should be structured into all of the leases that are applied to the negotiations with new tenants as they enter the property. In this way you can make marketing a component of occupancy for each tenant and impose a marketing levy that all tenants can contribute towards.
A well marketed retail property will produce more trade, and that is of benefit to the tenants and the landlord. The marketing plan for the property can be part of the annual business plan for the property.
Here are some factors that can be incorporated into the establishment of the marketing campaign and plan for your property.
- All the tenants in the property will benefit from the marketing effort. For this reason you should meet will all of the tenants in preparation for the plan creation and implementation. All of the tenants will have valuable input when it comes to marketing, trade and customer needs. In larger properties it pays to have a committee of tenants established to coordinate the tenant requirements and feedback.
- Ensure that the leases that apply to the tenants support the marketing effort in some way. Check all of the leases for each and every tenant. Some lease terms and conditions will have specific methods of handling the marketing efforts.
- Talk to the customers that visit the property. They will have valuable feedback as to what they would prefer in the tenant mix and how they see the property today. Any weaknesses can then be addressed in promoting the property and any leasing situations or changes that occur.
- The anchor tenant in the property has a special relationship to the other tenants and the landlord. A successful anchor tenant that is matched to the property and the local customer base, will help improve the market rental and the property performance. Keep in close contact with the anchor tenant to understand their trading pressures and customer findings. This information will help the design of your marketing campaign.
- Your local area will have factors of seasonal shopping. Those factors should be incorporated into the marketing plan. When you consider seasonal shopping, you can spread your marketing into special local festivities and holiday events. In this way a 12 month marketing budget can be structured.
- Have special regard for the transitional shoppers such as tourists and business people if that is a factor in your property performance today. What times of day or year do they visit your property, for what reason, and how should that be integrated into your marketing efforts?
When you establish a good marketing plan for your retail property, you have something to track and shape when it comes to improving sales and trade. In this way the market rental potential for the landlord is underpinned. The tenants will also be happy with the customer numbers that are coming to the property.
Retail leasing is a special part of the property industry. With the right knowledge and skills it can offer you as an agent, real opportunity in listings and commissions. Even in the tougher times when retail trade is under some pressure, good commissions are still to be had by retail leasing specialists.
The fact of the matter is that retail leasing is so specialised that only some agents have the knowledge or the focus to do it well. Shopping centres do not disappear when retail shopping is under pressure; they just change the tenant mix and market their tenant offering more specifically and aggressively.
So what can you do to lift your focus and become a good retail leasing expert? Here are some ideas to get you started:
- Research all of the shopping centres in your region. Assess each property with due regard for age, customer type, tenant mix, market rental, and vacancy factors. You will soon see some standards and trends that apply to a successful retail property.
- Local business owners will be a very good source of opportunity and leads. Talk to all the retail tenants in other properties to see what they are doing by way of opportunity and how they view the current retail trading conditions. Some of those business owners will be looking to relocate or expand premises.
- Review the standards that apply to the tenant mix in all the local shopping centres. You will soon see the successful tenants in the mix standing out for unique offering and marketing. It is those tenants that will thrive in most economic cycles. Talk to those tenants about current retail trade and what they may be looking for by way of a new business location.
- Get to know the principles of ‘clustering’ as they apply to retail shopping centre tenant mix and strategy. Well designed retail tenant ‘clusters’ are a part of a tenant retention plan and tenant mix strategy in any shopping centre.
- Rent types will change from property type to property type and location to location. Get to know the trends of market rentals that apply to retail properties through your region and compare those rents across different properties. As part of that process, include factors of outgoing and tenant operating costs in retail shopping centres. You will soon see how tenants must trade to be successful.
- Marketing trends in a shopping centre are both at a tenant level and also at a shopping centre level. The retail message has to be consistently spread around the shopping community and region. Look at the marketing efforts that apply to retail tenants and shopping centres. Good marketing will help the profile and trade of any shopping centre.
- Incentives will shift and change for new tenants in retail premises. Any new development project will offer new and high incentives to attract tenants to their premises. Monitor the retail developments coming up in your region.
- Retail shopping centre owners and shopping centre managers will need the assistance of a retail leasing expert from time to time. It is important to know that these people know what a retail property is all about and they will expect the same from the leasing people that help them with any upcoming vacancies. Make sure you know your facts, market, and tenant mix before you talk to these people.
- Franchise groups will move around the retail properties and region. Get to know the retail franchise groups for the lease needs they may have. As part of that process you will need to know their standard terms of occupancy and property requirements.
Retail leasing is a very special part of the property industry. For those of us that want to specialise in retail, the rewards are many.
When you have a vacancy or a pending vacancy in a commercial or retail property, you need to target the right tenant to fill that vacancy. This then suggests that not all tenants will be suitable for a given property, and that observation is correct and real.
Commercial property agents should know exactly what the right tenant would be for a given vacant area in any property; and then they should know how to find that targeted tenant. Top agents do this all the time. These top agents are in touch with the movements in the local area and business community.
- How much do you know about the local business community and its leasing pressures and leasing future?
- Do you know what tenants are looking for today when it comes to new property movements and where they are moving to?
- Are you in touch with lots of tenants as part of the prospecting model that you use?
So what does an ‘ideal tenant’ look like in your property location? To a degree the question is answered with the following factors in mind:
- The needs of the local business community
- The prevailing tenant mix
- Business sentiment and volatility
- Supply and demand for new and older lettable space
- The growth of the surrounding population
- The business base and profile of the local area
In any investment property location and area, there will be ‘seasons’ and ‘peaks’ of property enquiry in any given year. In most ‘years’ the leasing market is active for just 10 months, allowing for seasonal holidays, climatic conditions, and property availability. For this very reason it pays to work well in advance with known property vacancies and leasing requirements.
An ‘ideal tenant’ will vary from property to property but many of the following factors could be on the list of ‘tenant requirements’ from a landlord perspective.
- A stable business that brings brand and identity to the property
- A tenant that integrates into the property existing tenant mix well
- Lease terms and conditions that strengthen the property rental income over the lease term
- A solid and secure market rental that underpins the value of the property for the landlord
- Tenancy design and layout that gives a good image to the property
Does such a tenant exist? Yes is the basic answer, and to find them you should make contact with all of the businesses in the local area on a regular basis. Over time you will find the good tenants, and those that want to move to other quality properties. Most businesses stay within the same general location when they relocate, so they can take their customer base from property to property.
When you work on retail property as an agent, you will soon see the need to specialise locally. There is a lot of difference in property performance when you compare retail property to office property and industrial property. The factors that drive rental, lease enquiry, and property performance are totally different.
If you choose to be a retail leasing specialist, it pays to have a comprehensive knowledge of the factors that drive retail property sales, and retail property performance. All of these factors are linked and impact the activities of the tenants, the tenancy mix, the landlord, and the property manager.
Retail leasing strategies today will vary from property type to property type and location to location. They are however underpinned by local market awareness. To help you with the local market awareness here are some tips and ideas that you can merge into your business activities.
- Get to know all of the franchise groups that are located in your region or those that could be located in your region. Franchise groups are greatly involved with retail property leasing and property performance. They bring a brand to the property that can have significant benefit to the overall tenancy mix. That being said, they have a specific need when it comes to finding the right property and occupying that property. In many cases they will bring a specific lease to the landlord as part of the lease negotiation. In those circumstances, it pays for the landlord to have an experienced property solicitor to help them with the adjustment of the franchise lease document to make it relative to the subject property.
- The competing retail properties in your local area will always have factors of change. That will include expansion, contraction, renovation, and refurbishment. All of these things can shift the tenancy mix and drive tenants to other locations. That will have impact on your particular subject property. As a specialist in the area, keep on top of the changes to the local area in both demographics and property availability.
- Most shopping centres will have one or more anchor tenants as part of the tenancy mix. Anchor tenants are very special when it comes to the future of the property and the attraction of specialty tenants to the shopping centre. On that basis, it pays to connect with the relevant and successful anchor tenants that could occupy medium to large retail properties. Anchor tenants may be department stores, supermarkets, or hardware stores. Given the size of the tenancy that they would occupy, the rental terms and conditions will be significantly different in circumstances to those that are offered to the smaller specialty tenants. In exchange for these differences, you would normally negotiate an extensive and comprehensive lease with the anchor tenant over a long lease term. That being said, the anchor tenant must be the tenant that you require to match the needs of the local shopping demographics and the tenancy mix.
- When it comes to retail property, there will always be alternatives of rental, lease terms, and occupancy conditions. They will include rental levels, rental types, fitout controls, refurbishment strategies, relocation strategies, and landlord investment requirements. Get to know the activities of all competing properties so you can bring that information into those retail properties owned by your clients.
A property person that specializes in retail leasing will be in regular contact with the local business community. It is this business community that provides the specialty tenants for your properties. As part of that process, you should also be contacting tenants in other competing properties in case they need to change location or expand their particular business.
When it comes to managing a commercial or retail property, the landlords that you work with will have specific needs and requirements for the monthly report. In the monthly report certain things will need to be monitored and tracked to ensure that errors and omissions do not ‘slip through the cracks’.
Many a property manager has suffered the consequences of overlooking critical dates and critical issues in a particular property that they manage. For this very reason, the end of month report can be a very efficient way of monitoring current and future activity within the particular property.
Gone are the days of simply giving the client a financial report at month end with little commentary as part of the property management process.
Landlords expect property managers to provide a comprehensive and detailed property management process. It is not simply a matter of collecting the rent and chasing arrears. There are many more things to do when it comes to commercial and retail property performance.
Here are some tips and ideas that can be incorporated into your monthly report as it applies to your property management clients and landlords.
- The property income is always of concern to the landlord given that they need to match the income to their financial obligations and investment targets. The income should therefore be tracked on a daily basis to ensure that lease arrears are identified as soon as they occur. Some tenants will frequently stretch the required lease payments and make a late payment. The reality of the situation is that any late rental payment is in fact a default under the terms of the lease. The property manager needs to see this late payment of rental as soon as it occurs, and take the necessary action in accordance with the instructions that the landlord provides. As part of the monthly report, give the landlord a summary of income paid, income charged, and defaulting tenants. Always seek instructions from the landlord regards these defaulting tenants and the required processes of income recovery. A defaulting tenant can sometimes be converted back to ‘lease compliance’.
- The expenditure in a property will be both controlled and uncontrolled depending on the expenditure type. There are also some accounts that are ‘seasonal’ and quite large; for example they will usually be municipal rates and taxes, insurance, and energy costs. The property should always have sufficient funds to pay for these large and significant outgoings. For this very reason, a complex property with a lot of tenants will usually have an expenditure budget reflecting the timing of these outgoings activities and costs. The property manager should track the expenditure activity monthly to the budget, so that they know how much money they should hold back from the landlord as part of the end of month income remittance. It can be very embarrassing to all concerned when the property runs out of money at month end and the electricity supply is turned off to the building.
- The maintenance in a property will shift and change from time to time. Some maintenance in a property will be planned as part of the overall maintenance budget whilst others will occur as a result of unexpected breakdowns and repairs. The maintenance of the property should feature in the expenditure budget as part of the annual property business plan. At the end of each month the maintenance routines and the maintenance costs should be tracked against the existing and approved property budget.
- The tenancy mix and the existing leases within the property will have lease factors to be tracked. They will include rental changes, rent reviews, lease options, make-good requirements, insurance obligations, and renovation strategies. The list of possible actions and critical dates spinning out of the lease are quite large. When you take on a new property always review the leases comprehensively thereby defining any future critical dates that will require action and momentum at a particular time.
- The cash flow for the property will be optimized through a series of rent reviews, leasing strategies, new tenancy placements, and vacancy minimisation. The property manager should be managing these issues in a productive and comprehensive way. In doing this the property manager should be helping the landlord minimise cash flow disruption and instability.
- Lastly it should be said that the local market property conditions should be detailed in your monthly property management report. In this way the landlord can be completely appraised of the changes to the property market and the factors of supply and demand. When the landlord is briefed in this way, they understand the pressures of lease negotiation and tenancy placement. This knowledge will help when it comes to finding tenants and negotiating new leases.
This list is not finite; however it gives you a good idea of the complexity of the monthly property management report that can be created for your clients.
Take a proactive position when it comes to managing your particular property portfolio for your clients, and provide detailed comprehensive monthly reports. That will allow you to maintain and grow your property portfolio over time. It will also show your professionalism as an expert commercial or retail property manager.
When you lease a property, it is not just a matter of finding a tenant and matching them to a property. There is a lot more to the relationship and the leasing deal itself. This is where the professional property leasing agent stands well and truly above the other competitors in the market.
So let’s assume you have found a tenant in a property transaction and that you have negotiated a deal that is acceptable to both the tenant and the landlord. Moving the parties forward to lease finality will be part of your role and focus; if you do not stay with a property transaction to the very end, others can slow or stop the transaction without your knowledge (solicitors are good at that). Of course that will mean loss of commission and credibility. Top agents stay with the deal to the very end on behalf of their clients or principal; you should get in a habit of doing the very same.
Here is a leasing checklist that contains some of the main issues in a leasing deal. You can add to the list subject to your property type and location.
- Make sure that the lease that is created by the clients solicitor reflects the facts that have been discussed in your leasing negotiations.
- Get the lease signed by all the parties. It may be that solicitors for both parties do this, however, make sure that it is done in a timely way. Delays create uncertainty.
- As part of getting a lease signed, the rent should be paid together with the required lease deposit as a commitment by the tenant. Get the money into a trust account so that the cheques are cleared (or get a bank cheque).
- All bank guarantees and bonds should be lodged with the right people as part of the signing and the completion of the lease documents.
- Double check with all the solicitors (and particularly the solicitor acting for your client), that the correct documentation has been served and signed. Some leases require secondary supporting documentation such as disclosures and licences. The whole bundle of documents should be treated as one and all correctly signed. The completed and signed documents should be in the possession of the client’s solicitor.
- If all of the above is in order, it will be time to allow access to the premises, and hence hand over the keys. This should be done correctly with the receipting of the keys as they are exchanged, and the documenting of the condition of the premises at handover. These records will be required at the end of the lease when the premises are to be made good.
You can add to these items based on the property type and complexity. Importantly you can build a great checklist to keep you on track in finalising the lease. In the end result you will get a good commission and have a happy client.
When you manage a retail property there are a lot of things going on that need control and communication back to the landlord. That is where a good reporting system will help you greatly as a centre manager.
It is no secret that the retail property market can be a challenge at the moment with a significant shift between retail sales on the internet, versus retail sales in the shop. It is the retailer that suffers the downturn in trade, and as a consequence they must revisit their product and service offering. If they cannot make a go of it, then a distressed tenant soon turns into a vacant tenancy. The landlord then suffers in loss of income.
Today more than ever before there is a strong bond between tenants, customer, landlord, and property manager. The balance and success of a shopping centre sits in between all of them. They all have a vested interest to make a retail property work and perform as an investment.
Whilst it is nice to have a tenant and a lease for retail shop premises, a vacant tenancy is a waste of time and energy for all concerned. It is in the landlord’s best interest to help a tenant succeed in a retail shopping centre. The link between the two parties is the property manager. A good property manager knows how to help a property thrive and grow as an investment; they also know how to assist a distressed tenant get back on track with sales and customer numbers.
To keep the landlord fully briefed on the performance of a retail property, the monthly reporting system needs to be comprehensive and advanced. Here are some of the big topics to help you structure and provide a monthly report to your landlord client.
- Tenant mix activity should always be tracked. That will include the changes in a property and the upcoming lease activities.
- Lease rent reviews and lease options coming up should be planned and actioned early. Do not leave these things to the last minute. Many a landlord or property manager has been taken by surprise when it comes to a lease document that they did not fully understand.
- Tenant renovation will always be a priority in retail shopping and shopping centres. A shop that looks poorly for any reason will deter customers not just for that particular tenant, but also for those other tenants that are nearby.
- Maintenance in the property will occur for both planned and unexpected events. You must report on maintenance budget activity and results each month.
- Sales by tenant category and by tenant will give the landlord an indication of just what tenants are successful and those that are struggling. Trend these numbers in a graph so you can see what is going on in the property.
- Vacancy marketing will always be important to minimise the impact of loss of rent. Any existing or upcoming vacancy should be comprehensively marketed to attract new tenants to the property.
- Centre marketing to the local community will help with sales for each tenant. There should be a marketing fund for this process. The tenants lease should allow contribution by each tenant to the marketing fund.
- Income and expenditure will be updated each month for the property. In an ideal world the income and expenditure should track closely to budget; that being said, there will always be challenges that need resolve and management.
If you manage larger retail properties, then this list will get larger and deeper. Control will allow you as the property manager to keep the property on track as a retail property investment.
Even when the commercial property market is slow and difficult, there are certain advantages in the auction process that should not be overlooked or under estimated. The greatest advantage for all concerned is that the auction process gives momentum to the serious buyers that are available today and looking for property to purchase.
Even in the toughest of property markets, there will always be buyers available for most quality properties. The auctioning of a property is a very focused method of sale; it is implemented over a period of 6 to 8 weeks. During that time the appointed salesperson, the agency, and the client all have a vested interest to implement the strategy required to create buyer interest.
If the client is serious about taking their quality property to the market, then an auction process is worthwhile considering. The property may sell on the day or it may sell soon thereafter. Importantly the salesperson in the auction process has done the necessary work to flush out a few potential buyers that will be lodging offers as appropriate.
The client or owner of the property that is to be auctioned has to be realistic regards expected current market prices; that conditioning or information process is really the job of the salesperson to provide and implement. The client needs to be fully informed regards the factors of the local property market as they apply to the property type and the method of sale.
Another clear advantage of the auction process is that the resultant contract is normally unconditional and will proceed to a precise and timely settlement. The factors and delays of due diligence and subject to courses that you see in normal contracts do not normally apply in auctions between the time of sale and settlement. That being said, the client must ensure that all relevant facts and property details are accurate and correct prior to the auction marketing and inspection process. The bidders on the auction day need to be fully informed about the property prior to the placing of their bids.
The auction success rates will vary from time to time in your local area based on the amount of enquiry and the number of people that attend the property auction on the day. That being said, every property that is taken to auction has to be taken through a serious amount of marketing and deliberate attention to detail so that the correct amount of enquiry can be generated. Here are some clear strategies and tips that can apply to the auction of listing and marketing process.
- The auction method of sale is a timed strategy designed to flush out the buyers in the market. Genuine buyers always exist for a quality property; you just need to find them.
- The momentum of an auction should be timed across a period of 6 to 8 weeks. Most of the marketing campaign should be expended in the first half of that time period.
- Create a quality information memorandum relative to the property prior to the commencement marketing. When people make enquiries, and they are suitably qualified, you need to be sending out the information memorandum quickly and efficiently.
- Depending on the property, there may be a need for confidentiality relating to the information memorandum that you are to issue. This is normally the case when you’re dealing with larger properties with extensive tenancy details and matters relating to financial performance. On that basis you may need a confidentiality agreement to be signed prior to providing the information memorandum and inspecting the property with qualified prospects.
- Design a comprehensive marketing campaign that is targeted to a specific target audience and regional location. Most purchases of commercial property today come from the same general region.
- Check out the prices for similar properties in the region over the last two years. Identify any competing properties that will be on the market at the same time as your subject property.
- Get all the necessary reports and documentation together that support the function of the property, the improvements, the tenancy mix, and the property ownership. All of this should be done prior to any marketing commencing. Remove any hurdles or problems as part of this preparation process.
In any commercial or retail property market and at any time, the auction process is worthwhile considering as an alternative method of marketing. If that is to be the choice applicable to the subject property then the property owner, the agency, and the salesperson need to establish a firm mutual strategy of auction marketing, inspection, and promotion to get the correct message of the property out to the targeted audience. If the client wants a timely result in selling their property then the auction process is worth considering.