In a shopping centre today the tenant mix is really important to the attraction of customers to the property. The larger the property, the greater the challenge when it comes to placing tenants in the right locations and vacancies.
In considering a tenant mix strategy, it should be said that many large and or modern shopping centres do not like to give ‘lease term options’ in any lease negotiation. That is because they want to retain some control with the overall mix and leasing strategy. It is a wise move.
An option for a further lease term really has no benefit to anyone other than the tenant; it can be said that an option for ongoing occupancy removes from the landlord the flexibility needed to optimise property performance. Tenants on the other hand like to have a lease term option or extension so they can potentially consolidate the business or even sell it over the long term.
So how do you analyse the tenant mix? Here are some of the main ideas to help you get started:
- Start with a list of the existing tenants and the full detail of their leases. Make sure that you know the complete facts of all lease occupation and documentation. Look for weaknesses in those leases such as upcoming expiry, options, or rent reviews.
- The tenants with options for a further term will have ‘time frames’ outlined in their lease to indicate how the renewal or option will be exercised. Put those dates into a ‘negotiation diary’.
- Identify any tenants that are ‘monthly’ and have no lease document at this time. Determine if they should be retained in the property or replaced with better tenants.
- Some tenants may have renovation or relocation clauses in their leases. Understand how those issues will apply (if at all).
- Get a demographic profile undertaken of your ‘ideal customer’ to the property. Understand what that customer is looking for when they visit the property.
- Look at the history of occupancy for each tenant. Have they been cooperative and are they up to date in rental and other lease charges? Clearly you do not want a tenant in the property that can be regarded as ‘trouble’.
- Review existing properties in the area to do a vacancy and tenant analysis to see what volatility they may have in lease and tenant occupation. You will learn a lot from some of those other properties. Understand their strengths and weaknesses.
- From a list of existing tenants in your property determine the ones that are of ‘high quality’ and should be retained. You will need to put them into a ‘tenant retention plan’ that sets rent and lease strategies for the ongoing occupancy in the property.
- Some existing tenants are of little benefit to the property and should not be offered ongoing occupation at the end of their lease. That being said you will need to have a replacement program underway. What new tenants do you need to focus on as replacements?
- Anchor tenants will be the major drawcard for customers to your property. Ensure that your anchor tenants are as strong as they should be in attracting visitors to the property.
- Clustering is a concept that applies to tenants placed in a similar location in a large property. A ‘cluster’ is established to attract customers to a zone of the property for multiple sales and extend the shopping cycle.
- Get sales numbers and turnover figures from all your tenants (this will require their cooperation) so you can see what segments and tenants are highly successful.
- Assess door counts for the property with people visiting the property at different times and on all days of the week. Understand your best days and times.
When you have this detail, you have the elements to work with. You can start the tenant mix analysis.