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.
Commercial real estate is similar to other types of property in that you must logically and consistently work your territory. Your success in the process will give you greater listing opportunity and future deals. This will have immediate impact on your income and your success. This says that you must therefore be diligent and logical and how you approach territory management and control. We call the territory your ‘patch’. In controlling your territory, you must do so geographically street by street, so that you do not miss any properties or create any ‘black spots’ or ‘holes’ in your information. Many agents and salespeople have had situations where they have overlooked a simple small property in their canvassing processes only to find another agents board on the property offering it for sale or lease. Nothing can be more frustrating than seeing another agent’s signboard located inside your geographical area and a street that you canvassed last week.
Your Canvassing Object
In the territory that you work you will be optimising your commercial real estate awareness and knowledge of a number of property matters.
They are –
- Existing businesses
- Vacant land
- Redundant properties
- Development sites
- Property zoning areas and policies
- Owner occupiers of property
- Investor property owners of property
- Tenants occupying property
- Allied professional property related groups and people (solicitors, accountants, engineers, architects, quantity surveyors, valuers, town planners)
- Local Council Planning officers
The list is not finite, and can be improved to the specific nature of your region. To get thing started, firstly every major property in your territory must be high on the agenda for identifying ownership details and location. When you have this detail you move to more secondary property, and after this has been secured you will then get the detail of all remaining property through your region. It pays to get quickly active in the known property ‘hotspots’ such as industrial parks, and office business precincts, so that you can find to ‘hot’ listings before they go to other salespeople or agents.
Mapping and Planning
The best way to control your long term activities is to get a street map of the area and then work the geographic location in stages. Essentially you need to understand your area in great detail and have a solid awareness of the following matters –
- property ownership
- tenants and decision makers therein
- property zoning and potential changes there to
- property prices by property type and region
- property rental by property type and region
- property outgoings by property type and region
- lease detail and tenancy detail for all major and targeted properties
- a lease expiry profile for all major buildings and for the region
- regional business demographics
- regional population demographics
- regional economic demographics
- road changes and major traffic flows
- other competition properties and listings
- other agents in the area and their listings
- recent sales results in the area
- Details of properties that have been sold approximately three years ago and beyond, as these are the next properties that will enter the sales arena for disposal.
- Details of properties that have been leased approximately three years ago and beyond, as these are the next properties that will have a need for leasing services.
- Details of property owners that bought property about three years ago in the region as they are most likely to be sufficiently cashed up to acquire again soon.
This information will help you understand future opportunity and position your services such as sales, leasing, and property management.
Any commercial property landlord today will have concerns of tenancy mix and occupancy. The landlord will not usually want a vacancy to occur in a property, or suffer a substantial loss of income from a protracted vacancy. So what can you do with this problem? You can establish a tenant retention plan for the property, and it can become part of the annual business plan for the asset.
Tenant retention is simply the process of retaining your good tenants and removing your underperforming tenants from a managed property investment. When done correctly the process can enhance the income for the property and the overall investment for the long term. This then helps the sale of the property if and when it is to occur.
How Do You Get Started?
So how can you set up a tenant retention plan and what are the rules? Over time you can set up your specific plan for your property and landlord, but to get things going here are some tips to build the first tenant plan and start the process.
- Tenant retention is a specific process of a quality commercial or retail property management process. It is necessary that you look at all your tenants in the property today and decide just who the good ones are and who are the ones that you really do not want over the long term. What are your reasons for selecting tenants in either group? You will need some rules to help you choose.
- Respecting the terms and conditions of the existing leases you can manage the poor tenants out of the property at end of their leases; the object being here to offer the space to other existing good tenants in the property, or find new tenants to fill the void. Given that this is a critical process that will impact the income for the property, it should be a factor of consideration each year as you revisit the business plan for the asset and the landlord.
- Set some target market rentals that should be used with new tenants to the property and or existing tenants when they renew their occupancy. Get a property valuer to help with the setting of the right market rental benchmarks. Give due regard to gross and net rentals, plus required incentives to encourage a tenant to take out a new lease.
- Establish a standard lease for the property to control the terms and conditions for the property each time you do a new lease. The standard lease should match the specifications of the property and the investment needs of the landlord. A solicitor should help the landlord with this document.
- Monitor all existing leases that are coming up for rent review or expiry inside of the next two years. As the dates draw nearer, the negotiations can start based on the tenant retention plan and the property decisions already made.
- Check with all your good tenants frequently to ensure that they are happy in occupancy and that they are not under pressure for expansion or contraction. If they are, then you want to be working with them on that as early as possible before another landlord offers them another tenancy space elsewhere.
A tenant retention plan is a good strategy for any landlord or property manager. It sets the scene for a controlled growth of property performance for the landlord.