There are some key factors to watch and assess in shopping centre performance. Some of them are linked. There are also some stakeholders to the shopping centre performance process. A good shopping centre manager knows what to look for and shape over time when it comes to asset performance and the people involved. (NB – you can get plenty of tips about Shopping Center Operations and Performance in our Snapshot program right here – its free)
Rarely can you let a shopping centre operate as an investment without some form of intervention and guidance? The larger the shopping centre, the more complex the process, and many people will usually be involved.
The Start of the Process?
So exactly where can a centre manager start the property analysis and guidance process? Essentially the momentum starts with the property as it is currently, and categories of focus are created. Here are a few ideas for starters:
- Vacancies current and future – the best place to start with this topic is with the leases. All leases should be read and converted to summary synopsis of critical dates. The larger the tenant mix, the greater the list of critical dates. Look for the threats of vacancy and then plan your way towards them. Perhaps you can renegotiate a lease or move some tenants around.
- Arrears – dare I say that many properties will have arrears challenges from time to time. Some of those challenges are controllable; others not so. The message here is that arrears factors should be monitored and resolved in the best way possible that removes the problem of vacant space. Too much vacant space can destroy the investment performance. That is where the asset manager or centre manager has a role to play with arrears negotiations and current tenant placement.
- Tenant types by clusters and in the overall property – some tenants are better than others. Know what works for the location and the property. Select the best tenants with relevance to stability, retail offering, and cluster position. That then says that tenants should be placed into groups of other tenants where the clusters make sense.
- Competing assets and properties in the same customer demographic – look around the location at the other properties nearby to see how they impact your property from a trading and customer attraction perspective. Are they potentially taking your customers and your tenants? Look at the factors of attraction that they may be deploying in their local area marketing efforts.
- Customer types and demographics of the location – know exactly who your primary customers are for the location. Age, family size, spending patterns, and shopping frequency all have factors to consider in the equation. When you know your customers comprehensively then you can understand how to maximise sales and tenant interaction with the customers.
- Lease documentation for the existing tenants – at the elemental end of any retail investment and its performance will be tenants and occupancy documentation. Know what the leases say, how they work, what they create over time, and determine the priority issues that should be responded to as part of lease optimisation. Look at the lease covenants that apply to the tenant, and then look at the covenants that apply to the landlord. Are all elements of the lease being complied with under the terms of the lease covenants? Your client would normally be the landlord, so first and foremost protect your clients’ situation and the critical dates or lease matters around that.
- Risk analysis – risk can be many things in a shopping centre. Understand the risk factors for each property managed and leased. A shopping centre manager should know how to review all property matters that have the potential to disrupt the property in any way. Those issues then feature in the planning process of the property. They will usually be listed in the annual business plan for the property.
- Property maintenance routines – those are the routines that apply to the day to day operations of the property and the essential plant and machinery. Understand how the plant and machinery is performing today and where the risk of failures may be.
- Capital expenditure planning – some elements of the property will be large and capital intense. Their replacement will be handled differently than the day to day repairs items in the property. Usually, you must stage a capital upgrade strategy in a property for not only cost but also complexity.
- A business plan for the asset – ask questions about the property to see if a business plan has been created. That plan should encompass rental, tenant mix, maintenance, risk, and lease documentation amongst other things. The plan should also have relevance to the history of the property and the future development opportunities that may exist. A good plan should have a defined future for the property considering the investment plans of the client and the current market conditions.
- Tenant volatility – some tenants will be better than others. Some tenants will be simply a challenge from start of occupancy to the end. They require management; due regard should be given to the lease, the occupancy requirements of the tenant, and the payment of rents etc. Volatile tenants require unique directions of management.
- Upcoming lease terminations – if a lease is coming to an end, determine what will be happening with the space. Set some plans of vacancy marketing in place. Direct tenant marketing always works better than the online internet promotional process.
- Rents and occupancy costs – look at the occupancy costs to determine just how realistic they may be to current market rents and the retailers that you require to occupy space. Understand that occupancy costs are a combination of things for a tenant to lease the space; look at the totals and then determine just how suitable those numbers are for attracting and keeping tenants.
- Anchor tenants and the synergy they have for the location – when you have an anchor tenant in a property, look at the match and the marketing that applies to the customer base for the shopping centre. In the case of supermarkets, you can sometimes see the anchor tenant focus too much on their internal sales, with little integration to the overall shopping centre marketing message. Help the anchor tenants and the speciality tenants come together with a consistent marketing effort in the local area and across the appropriate customer base.
- Signage and retail presentation – look at the signage on the shops, in the common areas and across the external facades of the property. To attract customers the signage should be modern, fresh, illuminated, and well placed. There may be signage licenses that apply to the property and the tenancy mix, so do a complete signage audit of the property and the tenancies. Look at how the installed signs relate to the lease conditions.
- Common areas and community involvement – the malls and common areas in a shopping centre should feature zones for community displays and involvement. Help your community groups to have an involvement in the performance of the property. Get your tenants to integrate some of their business ideas with the community groups and drive special seasonal events and displays in the common areas of the property.
- Services and amenities – perhaps the most important aspect or zone of property presentation. Customers visit the amenities and will judge the operations and cleanliness of the shopping centre on the age and appearance of the amenities. Young families need toilet and washroom facilities that are clean, well lit, safe, and practical for family visits. Understand the importance of the washroom facilities in your shopping centre.
So, there are plenty of things here for you to review and work on as part of a shopping centre analysis. When you are managing or leasing a shopping centre, you need these things to work in your favor and remain under control.