When you look at the different types of investment property in most towns or cities, retail shopping centres are the most active when it comes to renovation and upkeep. That is simply because those property types must maintain customer interest and tenant occupancy to be successful as an investment vehicle.
It directly follows that every medium to large shopping centre should have a renovation blueprint or upgrade strategy as part of an ongoing business plan approach to tenant mix changes, lease management, and rental optimization. If you want a retail property to maintain good levels of trade, sales, and occupancy, then the building has to be improved and maintained. The landlord has to work with that fact and do something about it.
What can they see?
Local retail customers see things as they shop. They understand what is really happening in a shopping center from a practical perspective, and they will compare one property against another in a local area. They will shop where they feel happy, comfortable and safe, and where they get the true convenience that they need for the goods that they require. Property presentation is at the center of all of that.
Property business plan!
So put a renovation strategy into the retail business plan for your property and the landlord that you serve; do a cost benefit analysis from an investment perspective and then plan the changes and timing into the future. Look at how the property can be improved over time financially and physically, and then plan out how site works and leasing issues can evolve with a positive outcome for the landlord, the tenants and customers. Remember the stakeholders in the equation.
Here are some ideas to help you with that renovation planning and investment change:
- Tenant mix analysis – look at the tenant base that you have now and do a strengths and weaknesses analysis. Build on the strengths of the property as you resolve the weaknesses in income and tenant placement.
- Lease conditions, duration and expiry dates – taking into account the lease documents that you have for existing tenants, there will be an ideal timing for the renovation.
- Priority tenants – some tenants are better than others, so make a plan to keep your better tenants. Do a risk assessment from a tenant perspective.
- Landlord targets – How long does the landlord intend to keep the property, and how does the property fit into the landlord’s investment plans?
- Customer interest and requirements – understand how the customer profiles are changing and how the property is positioned with that change.
- Market rentals and vacancy factors – ideally you should be improving your tenant mix and the income you generate from that, so look at your current rent levels and make a realistic estimate of how they can be improved. Assess competing properties.
- Project cost and budget – assess the scope of the renovations and the timing of the works so you can do a cost benefit analysis.
- Professional fees – every renovation will cost money from a fee perspective in leasing and marketing.
Taking these things forward, you can build a reasonable plan of property upgrade and renovation. Remember that every retail shopping center should have such a plan so feed it into the property strategies that you provide for your clients.