How to Design a Successful Tenant Mix Analysis

In any retail property today, the tenant mix will largely impact the property performance and the income base.  If you neglect the tenant mix or occupancy issues, the rental and the vacancy factors in a property will quite likely change for the worse.

It is a known fact that a retail property is much more aligned to the customers and the local demographic than an office or industrial property.  If the connections are overlooked or forgotten, the tenant mix will suffer.  That is why a shopping centre manager is usually a very skilful marketer and property specialist; there are many things to be looked at in balance to help the property perform as an investment.  The property manager will be the person to do that and track the results for the landlord.

Here are some tips to help retail managers start with tenant mix modelling and optimization:

  1. Look at the existing tenant mix to determine where any weaknesses may exist.  Those weaknesses may be in rental, outgoings recovery, lease expiry, tenant choice, location or permitted use.  Those weaknesses will need to be worked through and resolved where possible.
  2. A good mix of tenants will reflect a matching between product offerings.  That is where tenant ‘clusters’ become important.  Small clusters of ‘like or complementary tenants’ will extend the interest of customers in shopping.  This then indicates that a tenant should be placed in a property based on not just individual factors but also the impact on the tenant cluster around it.
  3. Consider the needs of tenants for expansion and contraction.  Over time the tenant may need to be moved.  The lease for the premises should allow for relocation activity.
  4. In a retail property, presentation is everything.  Every tenant lease should have provisions for renovation and refurbishment.  This is even more important where a lease extends for a lengthy lease term.
  5. Understand the days that the shoppers prefer to visit the property and for what reasons.  The tenant mix must support the shopping focus for the local customers.  The marketing strategy for the property and the tenants should be matched to the shopping patterns during the week and over the seasons of the year.
  6. In most shopping centres there will be relationships between the specialty tenants and the anchor tenants.  They should both support each other in trade and attraction.  The marketing of the property may be based on the anchor tenant; however the specialty tenants can grow the attraction factor.
  7. Look at the points of entry to the property and the internal ‘foot traffic’ patterns.  They will indicate where your top rentals will be possible and best tenants should be placed.
  8. The car park for the property should offer shopper convenience as well as safety.  If a shopper cannot get to and from their vehicle in comfort and safety, they are likely to shop in a different property.

From these factors you can move into the property operations, lease strategy and rental optimisation.  Lease management is critical to the process.

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