Some retail shopping centres need refreshing and repackaging from time to time. That strategy and approach helps when it comes to sustaining customer interest and attracting ongoing retail sales. (NB – you can get more retail shopping center tenant mix ideas in our free ‘Snapshot’ course right here)
The approach to shopping center repackaging can be merged into the retail business plan strategy for the property over time.
It is worth remembering that a shopping centre and its presentation will be paramount when it comes to customer attraction and sales. Given the pressures of the Internet, the changes to customer interest, and the fluctuations of retail business, real tenant and merchandise strategies are required. The idea here is to maintain and bolster the tenancy mix, the customer interest, the presentation and the performance of a retail shopping centre.
The Basic Facts to Investigate
So where do you start? Go back in history; that’s a good place to start. Look at the performance of the shopping centre over time. Consider these questions:
- What strategy worked when it came to tenant placement and mix?
- What are the best tenants today?
- Where are their shops located in the property now?
- What attracted customers to the shopping center and why?
I go back to the point that real strategies are required to maintain the tenancy mix, sales, and market rentals. That’s where repackaging, renovation, and refurbishment become strategic changes to the shopping centre over time. Break down the factors of the property now so you can see what elements are strengths that you can do something with.
Retail Repackage and Revitalize
So, the repackaging strategies for a shopping centre today involve several different factors of tenant mix review and property staging. These are the main ones to look into:
- Lease Expiry Dates – start your review with the existing lease documents. Understand the expiry dates in each case and look for any lease options that may apply. Some tenants will be better than others when it comes to shop occupancy and retail trade. Assess the lease expiry dates regards the potential for maximising sales and improving the tenancy mix overall.
- Tenancy Mix Review – when looking at the mix of tenants in the property, look at the clusters in the various locations in and around the common areas, and around the entrance points to the mall. Some tenants will be more attractive than others when it comes to customer interest and involvement. The clusters of tenants should be assessed for attracting customers and sustaining sales in each of the zones.
- Vacancy Review – it is common in a retail property to avoid giving lease options and lease extensions. A lease option in a lease document generally restricts the landlord when it comes to investment decisions and changes to the tenancy mix. That is why options are discouraged as part of shopping centre leasing and management. As part of the vacancy review for the property, look for the expiring leases, and the leases with options to be exercised. The expiring leases can be actioned early when it comes to identifying any targeted tenant or tenancy type. Any upcoming options will need to be negotiated in accordance with the terms of the lease.
- Tenant Meetings – create meetings with your existing tenants to understand what they are seeing and thinking when it comes to their shop and the retail trade. Shop tenants are usually a valuable source of market evidence and sales opportunity. They will know quite quickly when the sales figures from a property are changing. They will also know what the customers are thinking.
- Property Presentation – review the common areas, the property surrounds, the shopping mall, and the customer access points from a presentational perspective. The shopping centre should look good and be well maintained to encourage customers to shop and return to the property over time. The lease document for the property should contain reasonable controls relating to shop presentation and signage regulation.
- Customer Surveys – on a six-monthly basis undertake customer surveys to understand what could be changing in the property. Understand the factors that apply when it comes to spending patterns, customer demographics for the region, and tenancy mix requirements from the perspective of a regular shopper.
- Landlord Investment Requirements – landlord will have certain targets and requirements to address when it comes to return on investment and growth of capital value. The occupancy factors and the rents in the property will have a lot to do with those numbers. Undertake a regular assessment of competing properties to see how they could be impacting your shopping centre and its tenancy mix and cash flow.
- Capital Works Program – as you move tenants in and around the property there will be opportunities to renovate and refurbish certain zones, shop fronts, and common areas. The shopping centre business plan should have a capital works program integrated into the cash flow over the upcoming five years. Planning a refurbishment or renovation allows careful expenditure controls and a potential improvement of net returns.
- Sales Targets – monitor the sales results for each tenant within the property. To achieve that, you will need certain terms and conditions in the lease document for the tenant so that they comply with financial sales disclosure.
- Market Rentals and Returns – stay close to the trends of market rentals for the property and for the property type. Competing properties will also have trends to watch when it comes to rental activity and vacancy factors. There are different types of rentals, and as part of that there will be incentives that apply when any new tenant is identified. When comparing market rentals and returns, break the rental down into its type and its relevance to any incentive applied to the lease transaction.
- Marketing Strategies – understand just how the existing marketing plan in the property is working today for the tenants, customer interest and sales. Look at the property website, the local demographic marketing initiatives, the sales by merchandise group and tenant, and seasonal sales by time of year. In interpreting those numbers, you will see how the promotional spend is working.
- Competing Retail Properties – review the region to identify other retail shopping centers that could be pulling away your customers. Review the tenant mix and vacancy factors in all competing properties.
- Moving Annual Turnover – on a tenant and merchandise basis, look at the moving annual turnover so you can see what is happening with sales and customer interest. You may see segments of the property, or tenant groups that are strong from a sales and customer perspective.
- Door-counters – the numbers of people accessing the retail property on a weekly and seasonal basis should be tracked for trends and changes. Compare the door-count traffic numbers to the car park use figures and the MAT’s for the tenants. It is also valuable to know what entrance points in the property are more commonly used by shoppers. Simple facts like these help you hone your marketing and tenancy plans in the property repositioning process.
There are a good number of issues to look at in this list. A retail shopping center is a vibrant and changing investment asset and property. Over time the building, the customer mix, and the tenants will be changing. Look for the changes in retail today, and market your property into future merchandise and shopping opportunity.