Mastering Rental Strategies in Shopping Center Leasing
The success of a shopping center is largely the product of a number of things. The rental set for the property and charged to the tenants is a big part of property success. So where can you start in getting a retail shopping center under control? The existing facts of the property will be a good start.
A business plan should be set for the property each year so you can negotiate leases and occupancy issues on predetermined rental decisions. That then removes the uncertainty issues of what a lease really means over a 3 year, 5 year, and 10 year term.
Rental strategies in shopping centers are largely driven from KPI’s set and determined for:
- Net rent
- Gross rent
- Incentives to be offered by both type and size
- The ideal term of lease
- Outgoings recoveries
- Rent review types and timing
- Option availability
So, all of these things impact the property cash flow and rental outcomes. Every single category should be considered prior to the commencement of any financial year and the benchmarks then applied to the property through a business plan.
In any moderate to large property, the planning process can take many days if not weeks. All of the following will be considered in planning and optimising a shopping center:
- Current market conditions will impact property choices and decisions.
- The size and type of tenant mix will impact tenant movement strategies.
- The given cash flow from the tenant mix at the moment taking into account rent reviews and options
- The existing vacancy factors and the known upcoming vacancies needing solutions.
- The history of the property financially will provide indicators in both income and expenditure to watch.
- The success of the anchor tenant(s) in attracting customers to the property
- The integration of specialty tenants to the activities and placement of the anchor tenants.
Given all of these things you can see why shopping center operations and the management process are quite special. Every lease under negotiation should be approached in keeping with the bigger rental picture.
