The Things that Everyone Needs to Know About Shopping Center Management
The process of shopping center management is quite special. Further to that fact, the people providing that professional service are critical to helping improve retail property performance. There is a lot of skill and knowledge in shopping center management.
If a retail property is struggling for any reason, one of the most common factors that I look into first is that of the property management team; I want to see if they are actually doing the right thing with the property based on the property design and the tenant mix. More importantly I want to understand if the team actually have the right skills and the knowledge to control the retail asset comprehensively.
Sometimes it is necessary to go into ‘damage control’ mode to fix the incorrect procedures and omissions of unskilled center management staff. That is when I have to do a complete and thorough property review and assessment. It can take weeks if not months to realign the errors of unskilled retail property management staff.
Start the Retail Assessment Here
Here are some of the main factors that I look into first and foremost when assessing a retail property and its performance:
- Tenant Mix – When you look at all the tenants in a retail property you can quickly split the group up into high value tenants for the long term success of the property, and the others that really don’t bring any advantage to the property. The idea of a tenant mix is that tenants can be placed in parts of the property to suit their offering of services or product. The tenants can also be placed in proximity to others to consolidate the ‘clustering’ process and boost sales.
- Market Rental – A market rent is something that is determined by negotiation between the parties. It is not something that is determined by some index calculation or some fixed increase in the lease. Every property manager and property owner should be concerned about the prevailing market rental for the location and its comparison to true market rents in a given property. Look for the differences in levels of market rent and negotiate all leases based on rental facts and not inflated landlord rental perceptions.
- Vacancy factors – A given town or city will likely set vacancy trends and vacancy factors based on local issues first and foremost; certainly retail sentiment and regional economic conditions will also have an impact on retail vacancy levels, but local issues will be the first factors of impact. Do a regular assessment of vacancy activity to see how it could shift market rents and incentives.
- Tenant retention plan – Any good quality retail property should have a tenant retention plan to underpin occupancy and rent. The retention plan should be incorporated into the business plan for the property, the current and upcoming lease negotiations, and the tenant mix strategy including clustering principles.
- Customer profiles – Some shopping centers differ radically from each other in a number of ways simply because of the customer demographic. A quality retail property will undertake regular market studies and surveys of shoppers. I like to look for the recent market surveys and see how the property marketing strategy is matched into the customer demographic.
- Marketing strategy and funds – A good retail property will have a marketing strategy and a levy for marketing to which tenants will contribute. The seasons of the year and the local holidays should all feature within the marketing spend for the year. A question that then follows on will be how the tenants are featured in the marketing and how the anchor tenants are involved in the marketing.
- Anchor tenant(s) – How involved are the anchor tenants in the shopping center with planned promotions and the overall customer strategy? The larger tenants in any shopping center will draw in the customers, but they must market themselves in ways that integrate into the overall property. Specialty tenants and anchor tenants can complement each other in the marketing process.
- Lease documentation – Check the tenant mix against the tenancy schedule for the property and the lease documentation. Commonly you will find missing links and facts that relate to critical dates and occupancy compliance or decisions. Make sure that everything is up to date with all tenants and the supporting documentation.
I think you can understand now the key issues of retail property performance. When you comprehensively cover off on these issues, you can then move into matters of greater detail. When in any doubt ask more questions (that’s what I do).
