If you are involved with shopping centre management or leasing, it is important that you educate yourself specifically regards retail business activity and the differences between particular retail businesses in both customer profiles and potential levels of trade.
In any retail economy, some businesses will thrive better than others and that will be due to a number of factors including merchandise offering, shop location, passing foot traffic, the levels of competition, and typical customer demographics. Your job is to understand the differences and select the correct tenants for the retail property and the particular shop vacancies.
Here are some rules to help you get further into the topic and the dynamics of a retail shopping centre tenant mix. In that way you can achieve better results from your leasing activities and tenant selection processes:
- Customer profiles – Each shopping centre will have a specific customer profile. At different times of the year and on different days of the week retail sales and customer interest will impact property performance across sales, rentals, and occupancy. Review the customer profiles that apply to the retail property and understand how those customers spend money; also determine why they would be visiting your property. Look for the retail shopping patterns and understand the types of retail businesses that the customers are looking for within the tenancy mix.
- Talk to the existing tenants – It is remarkable how much information you can obtain from the existing tenancy profile and tenant mix. In any retail property the existing tenants will tell you how sales are occurring or evolving and what customers are looking for are. That information can be valuable when it comes to resolving vacancy issues and improving the tenancy mix.
- Different types of retail businesses – The profit margins achieved by different tenants will be unique for each business type. On that basis certain businesses will have less flexibility when it comes to paying higher market rents and occupancy costs; aggressive market rentals can drive tenants away from a property and create a higher vacancy factor. Whilst it would be nice to fill the retail property with high quality tenants paying top market rentals, the limitations on business performance and the pressures of occupancy costs can frustrate the equation. There are differences between business types when it comes to gross profit margins and business running costs. Help the landlord understand the differences in gross profits between business types.
- Occupancy costs – Each retail property will have costs associated with occupancy. Those costs will usually include rental, outgoings recovery, energy, consumable gas and water, and marketing. Every business will have limitations when it comes to paying occupancy costs from the gross profit. In saying that, a successful retail shopping centre will be a carefully balanced tenant mix across a number of tenant types and merchandise offerings. A good shopping centre will offer a variety and value to the customers across many different merchandise lines.
- Fit out design and construction – When you have leased a vacant shop to a new tenant, there are special issues to consider with fit out design and construction. Ultimately you want the newly constructed shop to give the correct image and customer experience. Set the rules regards expectations when it comes to fit out design and appearance. Those rules can be merged into the standard lease for the document. A successful tenancy mix usually reflects attractive shop design and customer friendly layout.
So there are plenty of things that you can do here when it comes to understanding shopping centre performance and tenant selection processes. Make the right choices when it comes to the tenant mix and the tenant offering.