retail shopping mall and escalators

Determining Your Best Target Market as a Retail Property Specialist

If you work as an agent or broker in retail property today, it is wise to make a few observations and direct choices locally when it comes to the segment of the retail market that you should serve.  As a true ‘specialist’ in the segment, you can then attract more new business.

Not every segment of the retail property market will offer the same factors of listing and commission growth.   A lot will depend on the demographics of your local town or suburb, and what the shoppers are looking for.  Retail sales and shopping center growth will evolve from that.  The ‘spin off’ for you will be in sales, leasing, and property management.

So here are a few retail choices and ideas that are quite common opportunities, and are likely to be relevant in your area.  What is the most active segment for you?

  • Shopping Center Leasing
  • Stand-alone Shop Leasing
  • Shopping Center Sales
  • Retail Property Management
  • Tenant Mix Improvement Strategies
  • Renovation and Re-leasing Retail Projects

All of these are quite special segments of the market.  There will be some ‘lap over’ between leasing and sales, and also leasing and property management; fees exist in both directions.  The questions you should address about the market all hinge on ‘growth’.

So let’s say that you can determine what segment of the retail property market is for you as a ‘local specialist’.   When you make the right choice in retail property more commissions are possible from better quality listings; there is no point being a specialist in a market segment that has little action or opportunity.

Are you the ‘go to’ agent for a segment of retail property?  If the answer is ‘yes’, then from that point onwards your skills and knowledge should grow around retail results and trends such as:

  1. Location – When you really study your town or city you will soon see the better areas for retailing and new property developments with a retail focus.
  2. Prices – As a segment of the property market, retail is at the higher end of property values and construction costs.  The levels of finishes and improvements drive up construction costs; that is why rents and returns are so special for the retail property segment.
  3. Rentals – There will be changes throughout the year with net and gross rentals for retail.  Between both rental types you will have the impact of outgoings and operational costs for the landlord.  Watch the trends in those numbers by location and by property size.  Any retail property that you take to the market for sale or lease should be within the averages.  If that is not the case you will need to know why that is so.
  4. Improvements – Some improvements will be ideal for retail shop occupancy and growing retail sales.  The tenants today know what they need when it comes to shop fronts, shop configurations, fitout, display lighting, signage, and floor space.  They know how to extract the best sale dollar from the shop design.  You will also need to know that.
  5. Vacancy factors – At any time in the property market there will be vacancy factors at play.  New property developments and incentives will have something to do with vacancies.  Track the active vacancy rate that applies in your market segment.
  6. Supply and demand – The ratio of supply and demand will be impacted by new property developments coming into the market.  Assess the available space by property type (local retail, regional shopping, tourism, etc)
  7. Tenant movement – When you watch the larger retail properties and particularly the shopping centers, you can see how tenants are moving around and relocating.  It is not uncommon in retail for the landlord to not provide an option for another lease term.  That then gives the landlord maximum flexibility when it comes to tenant mix and tenant selection.  In prime retail property the strategy is well founded.  You have to keep the shopping center vibrant and active; changing tenants and brands allows that to occur.
  8. Occupancy costs per property type and retailer group – The payment and recovery of outgoings or occupancy costs will impact retailer viability.  A landlord that oversteps the mark on high outgoings or aggressive occupancy costs will threaten retailer viability.  That can be the start of higher vacancy rates.
  9. Anchor tenants – What do anchor tenants need in a property?  What anchor tenants are more suited to your market?  What rents can they afford to pay given their offering and by merchandise type?  When you know the answers, you have a strategy to work with anchor tenants and the leases to support major occupancy in a prime retail shopping center.
  10. Speciality tenants – One thing that supports and diversifies retail shopping center performance, is the selection of smaller or specialty retailers.  A good tenant mix will be a carefully grouped selection of tenants, products offered, anchor tenants, clustering strategies, local and national brands.  Your customer profile for the property will have something to do with the bundle of tenants and anchors that you put together
  11. Franchise groups – Some national brands and franchise groups will have a relevance to your customer profile.  It is valuable to keep in close contact with franchise groups so you can attract them to your property at the right time.
  12. Investment trends – The age and the location of a shopping center will have a bit to do with the overall investment strategy.  You can make choices on rentals, rent returns, and tenancy placement to improve returns for a landlord; operating costs and refurbishment strategies will also have an impact on retail property performance.

So there is a fair bit of information and action that you can tap into as a specialist property agent.  In closing on this topic, it is worthwhile noting that retail property today offers great opportunity in so many ways.  Can you satisfy the demands of the market?  Are you the ‘go-to’ agent of choice?

When you really understand the retail property market, you can build a good list of opportunities, listings, clients, landlords and tenants.

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