Attracting Tenants to Your Retail Property

man shopping for fruit
Attract the right tenants to your retail property today.

Every property is unique and special. Each property has got a mixture of negative and positive issues emanating from the design and layout. To set up a productive tenant mix you have to do the best with what the property offers design wise.

A successful property requires successful tenants, and not just tenants that pay rent. This is where tenant mix is critical. To do this you need to know:

  • Rents
  • Lease terms
  • Fitout construction rules and costs
  • Incentive alternatives
  • Option structures
  • Rent review alternatives
  • Tenant preferences

Tenants are selective in what they lease. They want the best, and in this market you have to provide it if you are a property manager or a landlord. Your property has to be the best available offering in the property market at the moment.

Consider this question. What are the top 4 reasons why someone should occupy your property as a tenant? If you do not have a solid set of answers then you have a problem.

Your property should provide something that the other properties do not have or find it difficult to offer. Your property has to be the best available. You should be a property magnet to attract the tenants. So where do you start when attracting tenants to your tenant mix?

The features of the property and the design of the property will be the base from which you consider where the tenants are going to be placed. Look at the design and consider where the customers will come from inn and around the property.

What will be the ‘ant track’ by which the customers walk and pass through the property? Any corners or turning points in the ‘ant track’ are likely to be high traffic areas and if handled correctly will be the source of higher rent. At these corners you want smaller tenants with a vibrant retail offering. The successful retail property is totally about the tenants and not much else.

Without the tenants then the property will likely fail. Look around. Details of physical features of properties should be noted so that you can build on opportunities and positive aspects of the property with potential new tenants.  All the information gained should be included on an appropriate and organised listing form and recorded as both hard copy and as part of a computerised listing package.

Ultimately you will be producing a leasing brochure and information package to present your exceptional property to potential tenants in its best aspect.  All investors and owners of commercial property have differing investment and ownership needs. This then leads to the core decisions that they will make when you locate a tenant or adjust the tenancy mix.

It could be that the client has a preference to hold the property for a short period of time and then undertake a redevelopment or expansion of the property. This will have significant impact on how you would construct the tenancy mix and lease profile for the property.

To handle these facts you interview the client and discuss the investor’s property requirements before proceeding with any part of the professional leasing and tenancy services that comes with commercial real estate. You need to match your leasing and tenancy services to their property holding needs. Your skill is in assessing the potential leasing and tenant balance of the property and then shaping the leases to support the rental income needs is essential.

Choosing the Right Tenant for the Retail Tenant Mix

woman shopping with bags
There are many steps to building a good retail tenant mix.

It is incumbent on any landlord to know his tenant’s business and how it will balance within the overall tenant mix profile. The landlord can then have a sense of how a lease deal can be made to ensure a long-term tenancy. The soundest economic lease agreement most probably will not be the highest rent agreement. Take the following steps when evaluating a prospective tenant:

  • Rent Capability: Question the tenant’s ability to pay the rent being negotiated. Be willing to move the tenant into a smaller or less expensive space if doing so is in both parties’ long-term interest.
  • Profit and Loss history: Ask for the tenant’s other stores’ profit and loss statements for comparative analysis.
  • Sales projections: Ask the tenant for the projected sales at your location. Do the numbers seem high or low in comparison with the per square foot sales of other categories like this in the centre or trade area?
  • Communicate: Establish a trusting rapport going into the tenancy. Handle relationships one to one so you hear of problems before it’s too late to resolve them.
  • Management strategy: Ask about the tenant’s management plan. Is he going to be an absentee owner, or a hands-on operator? Will his management team be able to weather a downturn in the economy or a direct competitor across the street?

Likewise, shopping centre management should continually evaluate existing tenants. Check their sales trends – are they up or down? If they are down, a meeting may be in order to address any existing problems. If your existing tenant has established a strong track record over a number of years, don’t lose him. Communicate. Again, understanding each another’s position will effectively maintain long-term tenancy.

Location Based Retail Anchor Tenants

woman shopping for fruit in a shopping centre
Choose the best tenants to improve your tenant mix.

In larger retail properties today, you need a quality anchor tenant that is location based.  In saying that, they should be closely aligned to the local community and the demographics of the area.  For this reason, leasing managers and property managers should select anchor tenants well and ensure that the anchor tenants will build a customer base into the local area without difficulty.

A strong anchor tenant will encourage more shoppers to a retail property and consequently help the specialty tenants in the property with their trade and sales.  The link between the anchor tenant and the property is therefore high.

To help the anchor tenant with this close alliance with the property, consider the following factors:

  1. The anchor tenant should be encouraged to market their business into the local area.  It is wise to have some guidelines established for that process to occur.  The anchor tenant’s lease can set out some guidelines for that.
  2. The specialty tenants should join with the anchor tenant in a regular marketing effort to promote the property.  The specialty tenants can have a clause in their lease that requires them to pay a percentage of their rent to the marketing fund of the property.  The property manager should administer the marketing effort on behalf of the tenants and the landlord.
  3. The lease for the anchor tenant will need to be a lengthy period of time to give the property some stability over the long term.
  4. Look at how the access to the anchor tenancy is obtained by customers and how that access can incorporate involvement or profiling of the speciality tenants in the property.  Follow the ‘foot traffic’ to see what marketing effort can be established in the ‘corridor’ or pathway to the anchor tenant entry.
  5. The pylon sign on the property will be critical to the image and exposure for all tenants.  The anchor tenant will feature in the signage and then all specialty tenants should be on the same pylon sign.  Look at the pylon sign placement to passing vehicle traffic and pedestrians.
  6. If the local area is serviced by public transport, get some marketing material and posters into the transport systems and drop off points.
  7. Understand just how tenants access the property and how long they stay in the property.  What do they buy when they visit?  These questions will help you understand what the tenant mix requires to strengthen trade for the anchor tenant and the specialty tenants.
  8. Get marketing brochures into the local community and give special attention to seasonal sales or celebrations.  The community will get involved with your property if you create the right atmosphere.

There is a fine balance between the tenants in the property, the community, and the landlord.  The property manager or leasing manager for the property has to bring all of that together.