When it comes to managing and leasing any retail shopping centre today, it is quite important to undertake a needs analysis within the tenancy mix on a regular basis. That needs analysis will take into account the location factors of the property, the investment requirements of the landlord, the tenancy mix challenges, and the interests of the customers.
A good degree of market research will be required as part of that needs analysis. Specialized research will include the opinions and the requirements of all of the retail stakeholders including customers, tenants, the financiers, and the landlord. Know everything about the shopping center before you get started on the factors of the tenant, the mix, and the leasing.
Where is the property headed as an investment? They will all have their requirements and point of focus. A good Shopping Center Manager will be part of that ongoing planning process for the retail property; they will balance the interests of the various parties and pressures of property ownership and occupation.
So how can you do all of this in a logical and direct way? Review the economic and retail shopping pressures prevailing at the time of the assessment, and consider all of the predictable retail indicators for the property in the region. Understand the competing properties, the vacancy factors, and the rental returns. How do they all compare across the comparable properties?
The object of the complete review process is to optimize the existing tenant types and to then refine the tenant placements and the occupancy conditions into the future. Ultimately this is to help make the shopping centre as successful as possible in customer interest, retail sales, and investment returns. Through the needs analysis you will be able to develop a strategic tenant retention plan and lease planning process.
Leasing and Tenant Mix challenges
Here are some ideas to help you improve a retail property or shopping centre taking into account the existing and prevailing leasing circumstances and tenancy challenges:
- Asset location – are there any particular challenges relating to the retail property and or shopping centre access? Can customers get to the property conveniently and safely as part of their weekly shopping requirements? Will you need to integrate the property more effectively into the public transport system for the region? Understand how the road network works in and around the property. Travel to the property in different ways and consider how a customer could do that.
- Understand the different locations of shops and tenants – look at the property currently to see how tenants and customers interact. Some parts of the property will be busier than others with tenants and foot traffic. Some shops will be more strategically successful than others. Market rents will be higher in those locations.
- Tenant mix balance and clustering – review the existing tenant mix and look for weaknesses and strengths. It is quite easy to identify the better retail tenants in a property. They will have plenty of stock, and the sales figures will be reflecting good sales. When you can see where the better tenants are located you can then look at the tenant clusters around them. Complementary tenants should be placed around the successful retailers. Make the most of your successful tenants.
- Retail offering or permitted use – take a serious look at just what people can sell in their shop under the terms of their lease. Permitted use in a lease is a good strategy to adopt in a retail shopping center; exclusivity is something to be avoided. Make sure that all the tenants are staying within their required offerings.
- Size of tenancy – review the size of the tenancy for the business type. Given that market rentals should be matched to retailer type and shop size, look at the variables and the market rentals across the property. Compare all of the retailers and the rents they are paying by shop type. The bigger anchor tenants will have an entirely different formula for rental assessments. They will occupy a much larger space and therefore the averages of market rental will be considerably different to the specialty tenants. Some anchor tenants will base their rental payments on a percentage of turnover, as well as a base rental. Read the lease in each case to understand the formula.
- Marketing and branding – every good shopping centre should have an effective and active marketing plan. That plan should be directed towards boosting sales and increasing customer interest. That marketing plan will be tuned to the seasonal celebrations for the region and the city. The tenants will have an involvement, as will the landlord when it comes to the effectiveness of the marketing campaign for the retail property throughout the year.
- Fit-out design and presentation – review each shop within the property for fit-out design, and presentation. Customers look at a shopping center, and they also review the appearance of the shop as they enter and leave it. The presentation of the fit-out will have a lot to do with ongoing sales. Assess all the tenants in your property and their shops in your tenant mix.
- Timing of occupancy – tenants come and go from a property so watch the expiry dates and address the upcoming vacancies in a timely way. Establish a tenant retention plan so you are keeping your better tenants in the property and replacing the poor performers.
- Experience of the tenant – the best tenants with a good business history will usually be great marketers and retailers. Assess each tenant for experience in the retail segment in which they operate.
- Financial capability – a financially strong tenant will usually have a business plan that directs performance and sales over time. You want more of those top quality tenants to show other less experienced tenants in the mix, just how things are done.
- Lease terms and conditions – review all the leases in the property so that the terms and conditions are understood and enforced. Some leases are better than others from an investment and landlord perspective. Do a full lease review when you take over any new retail property for lease and or property management.
There are some special things here to review and monitor as you improve a retail property with its tenants and leases. Create a checklist for that very purpose.