A Blueprint for Qualifying Retail Tenants for Shopping Center Leasing

The retail leasing process is quite special for a number of reasons.  If you work in retail leasing or shopping centre management then it is wise to fully understand the retail property market segment and the people that you are leasing space to. 

Retail is not like an office or industrial property; it is geared much more closely to the spending patterns of local people and consequently the economy overall for the region.

 Retail Leasing Strategies and Opportunities

So what can you do with retail leasing as a career and business segment? In most cases, you are working with small business people as tenants and on that basis, they can make or break your tenant mix and property performance. 

You must fully qualify any retail tenants about their business history and retail skills before you sign them up on a new lease proposal or offer.

Ways of Qualifying Tenants

Here are some important ideas to help you qualify retail tenants today:

1. Who are they? – Make sure that you are talking to the decision maker that drives the retail business and that they are the right person to talk to with all the experience with the product or service to be provided. Ultimately you want retailers that have a proven track record and that they can successfully market and sell the retail goods to a proven and established customer segment.
2. What is their history of retailing? – Find out how long they have been in business as retailers. They may have a number of shops established elsewhere that you can check out and inspect.  If they come to you from the local area or your town or city then they should understand the facts that will impact their business.  If on the other hand, they come to you from a remote location then they will need to prove to you that they understand their retail segment and its application in your city.  Retailing is not an experiment; it is a very special form of property use and occupancy.
3. Where have they come from? – If you know where they are coming from you may be able to speak to previous landlords and property managers that can give you some feedback and comfort about the integrity and knowledge of the tenant as a retailer.
4. What is their business plan? – They should have a business plan established to tap into the customers that are available. Ask to see their business plan and have them explain it to you. Get them to define their customers today and how they will tap into that segment of business locally.  They will need a strategy to reach out to the customers locally and specific marketing efforts will be required.
5. What is their marketing plan? – So the retail offering that they are potentially bringing to your property and tenant mix should be proven and specific. Can they tell you how they will be marketing their offerings to the local customer demographic?  Perhaps they will suit the shopping centre tenant mix that you are managing or leasing, but a marketing plan will be required.  That normally involves advertising, websites, flyers, brochures, special offers, and seasonal sales.  How will those things merge into the property marketing strategy?
6. Will the property suit the business? – The tenant mix existing in the property will have factors of risk to manage through such as rent negotiations, vacancy issues, fitout standards, and market rentals. Look at the existing facts about the property to make sure that any new tenant can fit into the ‘retail plan’ that is already established.  There is no point in destabilizing the rest of the tenant mix for the sake of one single tenant.
7. What type of lease will best satisfy the business? – The lease that you offer a new tenant can vary in so many ways. Rent types, lease duration, rent reviews, and options are some of the important facts to work through.  In some ways, the lease of any retail shop is a balancing of a number of facts to get things right.
8. What are their fit-out requirements and plans? – Most retail businesses today require a high quality fit out to portray the image of the business and maintain customer interest. A good fit out supports the functionality and marketing strategy behind the retail business.  What are the intentions of the tenant when it comes to fitout design and layout?  More importantly, have they got the money to spend on the fitout? Ask the key questions about what their fitout will be and how they are going to afford it.
9. Is there to be a franchise connection or agreement with the tenant or shop? – If the tenant is to be part of a franchise structure, then the lease agreement that they are to negotiate on the vacant shop will need to match the duration of the franchise agreement. You can’t have one without the other.  They will both need to expire at the same time.  That timing may impact your lease intentions or negotiations so check out the facts about any franchise issue before you get too far into lease negotiations.

From these questions, you can get to the important facts about occupancy in any lease negotiation.  You can add to this list based on the particular shopping centre and the vacancy to be filled.