Mastering the Art of Anchor Tenant Selection: A Key to Enhancing Shopping Centres

Shopping centres are a unique type of investment property. They can also be the most challenging due to the diverse mix of tenants, landlords’ specific requirements, and customers’ ever-changing interests.

Today, we’re diving into the exciting world of anchor tenant selection for shopping centres. We’ll explore the lease strategies, terms, and conditions that can ensure long-term retail success.

We’ve curated a practical matrix of anchor tenant management ideas if you want to elevate your retail property investment or shopping centre. These insights will guide you in attracting superior tenants and strategically placing them to optimise shopping centre performance.

Questions for Anchor Tenant Placement

Some questions to consider with anchor tenants, such as those below, are helpful for tenant selection and placement.

1. Retail Experience and Relevance

A deep understanding of an anchor tenant’s retail experience and activity in other locations is paramount when considering them for your property.

By thoroughly examining their business model, customer base, and sales patterns, you can glean invaluable insights into how the property can bolster their business in the long run. This knowledge empowers you to make well-informed decisions about retail tenant selection, a crucial aspect of retail property management.

2. Branding requirements and Signage

What are the anchor tenant’s branding requirements, and how can you ensure the branding is well-placed and attractive?

The anchor tenant may require signage in the property’s car park, on the building façade, and internally in the mall. So, the branding package for the anchor tenant will be merged into the lease, upgraded at times, and set with the landlord’s approval.

3. Lease terms and Conditions

Anchor tenant leases are usually longer, and the rental rates per unit of space are generally lower than those of the specialty tenants. So, the long lease duration offsets the lower rental lease rate.

The suitability of the anchor tenant and whether it matches the location, the customer, and the overall tenancy mix are essential to consider here. The lease for the anchor tenant is for the long term and perhaps 10 or 20 years.

What lease terms can you apply to the tenant’s lease to ensure that they will continue to attract customers? For example, you could consider refurbishment requirements every five years.

4. Flexible Lease terms

Fostering flexibility in lease structures and occupancy is advantageous and necessary in the dynamic retail shopping landscape, which is characterized by online shopping and changing customer preferences.

This approach empowers you to adapt to changes and retain successful tenants, minimising the downtime of vacancies. So, a tenant retention plan will help with lease negotiations with sitting tenants and prepare a plan for tenancy changes and upgrades.

The tenant retention plan is forward-looking for some two years and considers all lease options, expiry situations, and market rent reviews. Put the retention plan in the property budget and review it quarterly.

5. Foot Traffic

Foot traffic in shopping centres will impact retail sales, so ensure you know about the foot traffic around the property and through various entranceways on different days of the week and times of the year.

Know where people enter the shopping centre, on what days, and how they move around the property. Retail shopping has patterns; you must know that pattern as a landlord or centre manager.

Consider how the customers to the property will enter the property, move past the specialty tenants, and reach the anchor tenant. Put foot traffic counters on the doorways to the property.

6. Growth of Sales

Future-proof your retail property with longer lease terms for anchor tenants and rentals structured to grow sales and customer involvement. As part of that approach, stay close to your anchor tenants to ensure they are supported and involved in customer attraction and the overall enhancement of the tenant mix.

Anchor Tenant Engagement

Given these five points, consider the properties you manage and lease now. How engaged is the anchor tenant to the overall property dynamics and tenant mix? Can things be improved, and would that benefit the property overall?

If you can boost the property’s attraction factors to attract more shoppers and customers, that can inevitably underpin tenant stability and enhance market rentals. Everything is linked in shopping centre performance. Give it a try and watch your property improve over time.