In retail investment property the process of tenant mix analysis can be critical to the performance of the property for the landlord and the tenants. When you get the ‘mix’ just right, it underpins critical property factors such as rent, customer visits, sales, and can create lower vacancies.
From this it can be assumed that a property where leases are negotiated individually and without due regard for clustering and tenant mix, will be a property that is not optimised for results and ongoing performance. When you lease a tenancy within a retail property with lots of other tenants, you must look at the overall issues of tenant selection and placement.
Here are some rules to help you plan your tenant mix activity and placement in a retail property today:
- Look at the existing vacancies in the property. They will have an impact on the rental returns but they will also have an impact on the visual appearance of the property to the customers and tenants. If you have any vacancies in the asset and the mix, then you will need to make them appear to be occupied or active.
- Upcoming vacancies will be of concern and you will need to take action soon to prevent empty premises. Be on the lookout for good replacement tenants that suit the property and the customer demographic.
- Lease terms and conditions should be standardised wherever possible to help with the management of the retail property. That being said, it is very much the case that each lease should be interpreted to identify critical dates and issues that will need attention during tenant occupancy.
- Anchor tenants should be well selected to underpin the property stability and income profile. Keep your anchor tenants trading well and ensure that they are in sympathy with the customer demographic. They are the ‘magnet’ that gets people coming back to your property.
- Specialty tenants should be looked at relevant to the customers to the property and the surrounding clusters of adjacent and nearby tenants.
- Occupancy costs will impact occupancy. The outgoings for the property should be in balance to similar properties in the same general area.
- Landlord plans may change for the property so know what they are
- Competing properties will try to take your tenants so keep a close eye on those properties and their vacancy factors
- Customer demographics will be specific to your area and the type of property. Match the tenants and the mix to the property.
- Property age and condition may dictate certain tenancy changes and placements.
- Expansion and contraction factors may apply with some tenants.
- Look at the customer traffic numbers coming to the property on a regular basis and when that happens during the week.
- Permitted use clauses should be suitably strong for all tenants to prevent a clash of offering.
- Options and rent reviews will impact cash flow and vacancies so make the right choices with the tenants in the property and be prepared for negotiations well in advance.
Given the size and the property type you may add to these rules and build your property tenant profile with real focus. When you do that you can strengthen the income and the tenant stability for the landlord.