In a shopping center, you have to watch what is happening in the tenant mix, and from that process, there are particular strategies that can be developed to give the mix of retailers some leverage in sales and occupancy.
Ultimately that method of approach can strengthen the asset performance for the landlord. It’s all about property improvement for the landlord and tenants. You can then attract customers to the property.
Why Do This?
Why is all of this important? Retail properties, particularly shopping centers, are alive and well, but their physical and financial performance can be volatile.
A neglected shopping center can soon be a financial disaster, impacting tenants and turning away customers.
It would be incorrect for a landlord or shopping center manager to let a retail property evolve and function without constant shaping and involvement.
Rents and results can be improved over time; conversely losses and risk can be created by lack of retail focus within such a property.
The Tenant Mix Report Format
Here are some of the major tenant mix factors for center managers to control and report on as part of their landlord services:
- Lease Expiry dates and option calendar – When you consider all tenants in a retail property there will be potential income risk with lease expiration, options, and the critical dates associated with that. It is wise to track upcoming dates and events in a forward looking calendar and chart. The visual approach over the coming 2 years helps you see issues and events well in advance. Decisions can then be made with important tenants and locations within the property.
- Anchor and Specialty tenants – There will be big differences in the ways in which leases are negotiated and processed for anchor tenants versus specialty tenants. Anchor tenant performance in a retail property will be paramount to supporting the specialty retailers. The rents are different and the lease terms are different. Benchmarks and indicators should be set in each tenant grouping across lease standards and rents.
- Marketing activities – There should be a comprehensive marketing plan active across the shopping center to support sales and tenant success. The plan of promotion for the property is a forward looking strategy pulling in the activities and celebrations of the city, the seasons, and the community.
- Vacancy Factors – Understand the vacancies that you have now and what you are doing about them. Look for the upcoming threats to occupancy and any increase in vacancy activity. Get involved with the property to remove those problems.
- Relocation strategies – A property can be improved if you move tenants around into clusters that build retail sentiment and sales. A retail property can be enhanced by freshening up the tenant mix and moving your better retailers at lease expiry time into new locations that attract more customer interest and access.
- Sales trends and MAT – Monitor the sales of all tenants and track the sales trends individually and in merchandise groups. Look for the top retailers in each group and those that are under any sales pressure. Address sales weaknesses so that the overall mix improves.
- Renovation plans – A successful shopping center is a constant evolution of upgrades, premises changes, and improvements in presentation. Customers like to see a clean and vibrant property when they visit. Plan your renovations well in advance with due regard to seasonal sales, tenant business, and vacancy churn.
- Clustering strategies – You can place tenants across the property and into any vacancies with a base strategy of ‘clustering’. It is a concept where the tenants in each cluster can potentially feed customers to each other and thereby support a growth in sales.
- Market rent indicators – Watch the market rent trends for the region and across similar property types. Understand the rent differences as they relate to your property and the tenant mix.
- Outgoings indicators – The costs of occupancy can make or break tenancy viability. Your outgoings should be within the averages of the location and the property type. Those occupancy costs will be part of any lease negotiation and set the momentum in setting rents.
- Competing properties – Watch the tenant profiles, vacancy factors, and mix activities in any competing retail properties in your region. Potentially you could attract tenants from competing properties if you have the right factors of attraction from a leasing perspective.
- Capital expenditure planning – Like it or not, the larger items of property expenditure are frequently requiring attention and plant and equipment replacements have to be planned. A shopping center should have a capital expenditure calendar and strategy set as part of the business plan for the asset.
You can see from these factors, how a tenancy mix report should be shaped and considered.
Such a report is a valuable tool for monitoring the activities of lease and tenant change in any retail shopping center. The landlords that you service are then fully informed as to the direction of the asset.