If you are to embark on a shopping centre renovation project for your clients, then look at all the issues of importance to the project outcome. A retail property is an income generating investment, so careful planning is needed to ensure that all stakeholders are not put under pressure or threat.
Ask yourself the key questions like these:
- Will you achieve a better tenant mix?
- What type of tenants will be attracted to the property and why?
- When should the renovation get underway? When will it finish?
- What rental improvements can you achieve after the renovation?
- How will the tenants be impacted in the zone of the renovation?
- How can you minimise disruption to customers visiting the property?
If you compare a retail investment property to that of industrial or office property, the dynamics of the tenant mix and the rental structure are more closely integrated to the local area. Small factors of change can impact the tenants, the landlord, and the financiers. Care and control are required in any renovation.
Here are some alternatives to consider in any retail property upgrade and renovation:
- Look at the pressures that will occur on your specialty tenants and the anchor tenants. You may need to consider the threat of lower rentals and higher vacancy factors during the renovation activity. The larger the renovation the more disruption is likely on the stakeholders and tenants.
- If the retail property market is under customer or sales pressure, you could do nothing with the renovation until a better time is determined. It is a critical decision but an important one.
- A simple way to fix a presentational problem in any retail property is to rehabilitate poorly presented areas. That is then a simple ‘face lift’ in presentation to get you through until major works can occur.
- Modernisation is something that should constantly happen in any retail property. Customers soon sense if they are not getting the best services or amenities in the property. Give special attention to the common areas in considering this category.
- You can remodel the property and add more shops. To understand that this is a real option you should have done your studies of the local customers and growth of the shopper demographic. Also look at the surrounding area for competing properties and look at how they can impact your property plans.
- Rental structures can be improved and incorporated into better leases for the landlord. Depending on the investment plans of the landlord, there will be alternatives when it comes to rental types (gross or net), incentives, and lease occupancy. A well-considered tenancy mix will have benefits with improved property value as well as customer attraction. Make the right choices here.
There must be clear reasons and goals behind the renovation of any retail property or shopping centre. Gather the right information and look at all variables of the retail shopping cycle in your local area.