When you run a retail real estate agency specialising in retail leasing and property management, you really need a top agent that knows what retail property is all about. The leasing of retail is very special; far more so than office or industrial property. The selection of tenants will be made with due regard to the tenancy mix and the customer profiles that access the property.
It can take a leasing agent some years to fully understand the complexity of shopping centre performance and how tenants should be selected for a current or pending vacancy in the property. The correct tenant selection will help boost the customer attraction of the property, and eventually the turnover or trade.
So what would you expect a retail leasing specialist to know or bring to you and your agency? Here are some tips to help you:
Rents will vary from property to property. This change requires knowledge and experience when it comes to gross and net rents, together with the incentives that are available to lease premises to new retail tenants in your local area.
Lease types together with the terms and conditions for a particular tenant will require negotiation based on the local leasing laws relating to retail property. In many respects, retail leasing is more complex and the documentation behind the process is more rigid and
Tenant enquiry will change from location to location, however in retail property it is very much the case that the leasing agent has to get out into the business community and the other local shopping centres to talk to the existing tenants. In this way they will find tenants that want to relocate, expand, or contract. It is important to choose tenants that are at the top of their product or service offering.
New shopping centre projects and development timing will have impact on your current shopping centre and its future performance. Always watch the supply and demand for retail space locally. Any new leasing specialist should track these changes and the availability of retail space coming into the property market over the coming 2 years.
Property owners and new tenants that are looking for retail property are a unique breed unto themselves. They require understanding and a leasing expert that can talk ‘retail’ from many different angles.
Franchise groups will require retail space to locate new businesses into. That being said, franchises are a business model that has particular requirements of location and customer base. It pays to have a leasing expert that understands how the franchises think and what they are looking for.
Outgoings costs will have a major impact on rental (gross and net) as well as a tenants occupancy costs. Every retail property will have outgoings of a level that allows the property to operate efficiently and safely. The important factor here is that the outgoings for a particular property should be of a level that is comparable to other properties locally of similar size and type.
Tenant mix and clustering are knowledge skills needed by a retail leasing expert. When the tenant mix is correctly structured it builds a better market rental for the landlord and helps reduce the vacancy factor in the property.
Document knowledge and negotiation skills in retail property are quite unique when it comes to handling and working with small businesses. A leasing expert should understand what variables can be used in a good lease negotiation for a shopping centre or retail property.
So, all of these things would indicate that a retail leasing expert is a special type of person. Over time these skills can be learned; importantly the person chosen for the role has the right skill mix to take the role to the top of the industry locally.
In a retail property today, the tenant mix is likely to be the ‘make or break’ factor in property performance. A good tenant mix will help the property thrive and underpin the rentals for the property and the landlord.
So how can you get to know what works? It is easy to see examples of tenant mix profiles in other properties and then compare them to your property. Look for the situations that work and those that do not.
Clustering is one factor worth examining in other properties to see how they may handle the cluster concepts. Whilst you are there, look at their vacancy factors and just how they work with them.
Competing properties will also have factors of tenant loss and relocation; that is a good source of new tenants for your property.
Here are some other tips that can help you in your tenant mix design and property business plan.
Understand the local demographic of customers before you do anything else. Are there changes in the local area that will impact the customer base now or in the next couple of years? If so the factors will need to be in your business plan for the property. The business plan should be done every 12 months and reviewed quarterly.
Undertake a customer survey in your property and in the surrounding area. You will learn so many key things from that process. Why do people shop in your property? What would they like to see changed and why? How often do people come to your property and on what days?
Check out the existing competing properties in the local area. In this way you will see the differences that their customers see. Pay particular attention to the access and convenience factors with those properties before you look at the tenant mix internally. If there is one thing that frustrates many shoppers it is access and convenience. Can your retail property improve on anything that the other properties are struggling with?
The maintenance of your property will be driven by property layout, customer visits, and building age. Retail property is one of the most costly property types to maintain. That is why outgoings in retail are so high.
The anchor tenant or tenants in your property are likely to be established on a long lease(s) with appropriate rent reviews. The anchor tenant profile will help you lease the specialty tenant premises in the property. Create sound relations with your anchor tenants so the customer targets that they have integrate to the overall marketing plan for the property overall and the general tenant mix.
A great retail property performance is a constantly moving target. Over time you will be modifying your plans and strategies when new things are seen or the local area changes. Get involved with the local retail businesses and shopping community; you will soon know what they are looking for.
When it comes to leasing a commercial or retail property, you will find that there are special things that should happen to keep control of the transaction and the final stages of property handover. Eagerness produces errors and omissions from a leasing perspective.
The simple fact of the matter is that control helps us get the parties to the lease ‘across the line’. For that very reason it pays to have a checklist approach to the leasing process and property handover.
When you get a lease negotiation underway, so many things can come into the transaction and divert the discussions and agreements. Very commonly in the involvement of solicitors on behalf of the parties to the lease you will see that slow-down process start.
You are working for the client and they want a timely lease that is correctly executed and implemented. Always stay with the negotiation and the lease momentum to the very end. If a solicitor has the papers on behalf of a client, chase-up the situation and see where things can go next.
Here is a checklist for the leasing of premises; it features some of the main things that are really important in leasing and a timely outcome. You can add to the list based on your property type, and location.
The correct lease documents should be prepared with accurate regard for the facts from the original lease negotiation. Ensure that the client’s solicitor understands all of the facts and the unique elements of the property.
Some lease documents are just part of the required paperwork for the lease occupancy. At times there are other papers such as fit out agreements, disclosures, licences, and side agreements. All of these should be correctly signed and in the order that is relative to local property laws and leasing situations.
Any incentive agreements between the parties should be correctly documented and signed.
Any plans and drawings that are part of the leasing agreement should be sourced and available for approvals.
Any consultant reports relating to the transaction should be sourced. Typically they are mechanical, electrical, structural, and base building.
The permitted use for the premises should be clearly set and agreed between the parties. That use will have impact on the design of the premises.
Landlord approvals may be required before any building approvals are sought from the building and construction board or office.
All monies to be paid under the lease should be taken at the time of handing over of all lease documents from the tenant. Those monies should include bonds, guarantees, fit out contributions, and any other important financial commitments from the lease document.
Do not under any circumstances hand over the keys to the premises until the landlord and their legal advisor have indicated that all papers and monies are correct and in order with both parties. Importantly those documents should be signed by both parties.
Document the condition of the premises before the tenant takes over. This will be an important fact of record when it comes to the end of the lease.
When you create a lease handover checklist, you can keep the transaction on track to finality. That then means a happy client and a good commission.
When you lease a retail property or promote a vacancy to be leased, there is a fair bit of information to be sourced and set as part of the vacancy marketing effort. When you are fully informed and prepared, the retail leasing situation is much easier and more direct.
A retail tenant will ask lots of questions. They have a business to run and they need to know that the property can support their intended operations, marketing efforts, and trade.
The landlord that owns the retail property will have a lot to do with the overall success of the tenant mix and the levels of sales. Inexperienced retail landlords can destroy a tenant mix and retail property performance if they do not devote the correct focus on balancing key relationships.
Owning a retail property is a special process. The fine balance between the tenants, customers, property manager, and landlord should be protected and encouraged.
Some of the critical leasing factors in a retail property or shopping centre will include:
Levels of rental to be charged should be fair and reasonable in keeping with the existing and prevailing market rents. Far too many landlords set rent based on their need to finance the property or boost the property value. An aggressive rent can ‘kill’ the tenant mix faster than you would expect.
Types of rental will change from property to property but will include gross rent, net rent, and incentives. All of these rent issues require decisions based on existing market trends. Rental targets for the property should be set in the business plan for the property and be reviewed annually.
Tenancy space details will include area of the premises and configuration. Be careful in setting rent with narrow, long, and deep premises. When it comes to retail rental, it is the ‘frontage’ of the premises that sets the rent and sustains the customer interest.
Permitted use for the premises will be set based on the requirements of occupancy and the prevailing tenant mix. Decide what types of tenants you really want for the vacant premises. How will they balance the offering of adjacent and nearby tenants?
Existing tenant mix details should be reviewed. In doing that you can ascertain just what vacancies are coming up and how they will impact the zone of the property.
Supply and demand for retail space will change in the local area during the year. The impact of new property developments will also reflect in your market rental. Keep in contact with the local property development office to understand the new developments that may be coming up.
Car park information will include numbers of car parks and the access methods for customers and tenants. When it comes to retail property performance, the function of the car park will be important for the future levels of customer interaction and trade. In many respects, car parking today needs to be accessible, friendly, and secure. Customers will soon turn away from a property if car parking is too difficult.
Customer demographics and levels of trade will change throughout the year. Ensure that you understand the typical customer that comes to the property and the reasons why they do so. Those factors are likely to change throughout the year.
Signage rules and regulations will apply to particular tenancies. Any new tenant to a property should be suitably briefed on the signage policies that apply to shop presentation.
Landlord works and property improvements will be important issues to the incoming tenant. Exactly what will be provided to the tenant as part of the new tenancy lease? Will the lease for the tenant require special modification and allowances for unique tenancy improvements? What should happen at the end of the lease term with regard to premises make good?
Services and amenities to the property and to the tenancies will be important. All the expected facilities services and amenities should be well maintained and up to date. A property that is neglected when it comes to the maintenance of these issues will soon become redundant from the tenancy perspective.
Guarantors and the security deposit requirements will be parts of the negotiation process for the new lease. Decisions will need to be made regards the types of guarantees required and the amount of security deposit. These factors may vary depending on the tenant that you secure for the premises.
Fit out design and specifications will be important when a tenant is identified for the premises. Certain rules and regulations will be required to control the tenant during the fitout construction phase.
Outgoings and occupancy charges will have an impact on the tenant’s ability to trade. Review competing properties in the surrounding area to understand exactly the types of outgoings that are acceptable in the prevailing market conditions. Your property should be competitively positioned and not exceeding those charges in other properties.
Standard lease terms and conditions will vary from property to property and landlord to landlord. Those lease terms and conditions should be set prior to the premises being marketed. The landlord should consult with their solicitor to ensure that a good standard document is ready and available for use when the tenant is located. In most cases, the standard lease document will be modified for the existing tenancy and the requirements of occupancy. If you locate the franchise tenant for the property, it is likely that they will bring their standard lease to the negotiation. If that is the case, the landlord for the property will require legal assistance to shape the franchise tenant lease into something that works for the landlord and the property investment.
Property as built drawings will be very handy when it comes to tenancy negotiation and tenancy design. The as built drawings would normally be available through the property management office and or the landlord. The drawings will be required to help the tenant to understand tenancy design and the availability of mechanical plant and hydraulic services.
So the leasing of a retail property or premises within in a retail shopping centre will be quite a specific task requiring detailed information. When you prepare for the process of retail property leasing, negotiations can run more effectively and positively.
When you work in commercial real estate, you will see those ‘retail specialists’ in the local area that focus within the retail property market. Those retail people are very specialized given that their property type is quite specific and heavily geared to the local demographic.
In simple terms, a retail leasing specialist or property manager should help retail tenants improve their business and on that basis improve property occupation. When all of this occurs correctly, the prevailing market rental for the property will be underpinned and potentially grow. Over time this will also help the landlord for the property achieve a better price if and when the property comes up for sale.
So there is a significant link between tenant selection, retail trade, property leasing, and property performance. For this very reason those of us in the industry that understand retail property do so at a very high level and can talk across a large variety of strategies that relate to retail sales, leasing, and shopping centre management. The clients that we work for and especially those that own any complex retail property will only work use the best retail property people in the industry.
There are many things that should be considered and consolidated into your retail experience and knowledge base.
Market rentals will change from property type to property type. They will also change by location within the property. The positioning of a tenancy inside a retail premises will dictate the levels of rental, as will the size of the premises. There is no fixed and firm equation that can be provided to help you here, except the process of gaining market awareness and information from comparable properties. Over time you will understand what makes a property location different than others. You will also understand the priorities of tenancy location that will boost the rental in one particular spot or one particular property.
Different businesses can pay and absorb different levels of rental as part of property occupation. As a case in point, you will find that one tenancy type can pay more rental than another tenancy type. For example you could compare a shoe repair type tenancy to a food type tenancy. The levels of rental from each will be completely different for the same shop location, given that they will have separate levels of turnover relative to their business type. If the rent is too high for the business type, they will simply disappear as a tenant.
Different retail leases and different lease strategies will occur all the time. You become a strategist when it comes to utilising rental incentives, gross rent, net rent, lease terms, rent reviews, and option strategies. All of these are negotiated with due regard to the plans of the property owner, the age of the property, the tenant, and the demographics of the shopper.
When it comes to retail property, the success of the tenancy mix will largely be driven by the demographics of the area. Stay on top of the changes to the local property demographics and ensure that the property matches the current and future needs of the local community. That being said, you really do need to know exactly who your shopper is and why they visit the property. You also need to know what they require and when they need it.
Tenant enquiry for new premises will change from time to time based on the regional and local business sentiment. For this very reason, you should be staying very close to the retail businesses and franchise groups. All of those people in your database should be contacted regularly to identify any changes in leasing needs or opportunities.
Watch the activities of any competing retail properties in your area. That will include the tenancy mix, expansion and contraction factors, refurbishment, and relocation challenges. These trends and activities will give you some leverage in leasing and property performance.
Retail property people are specialists in their property craft. Their knowledge and expertise will be sought after when it comes to the larger shopping centers and the bigger retail leasing needs. Franchise groups and anchor tenants will also seek the assistance of retail property specialists.
A commercial real estate agency wants to dominate the market and create a solid market share. Whilst this is a worthwhile goal, it is also a challenge to achieve. There are many variables that will have a direct impact on the performance of the agency.
Some of the most frustrating aspects of managing and running a commercial real estate agency today relate to the skills of the salespeople. Finding salespeople to work within the business is one thing; finding great salespeople is really hard.
Some salespeople will seek to improve their business performance and drive better market share. Over time their income and listing profile will rise. Finding the right salespeople with this mindset can always be a challenge; the top agents of the commercial real estate world are diligent and driven. They know how to drive market share. They are prepared to call landlords, tenants, property owners, and business proprietors.
Here are some tips to help you build your market share as an agency or as a salesperson.
The traditional signboard placed on property listings for sale or for lease is perhaps one of the most important marketing tools that you can use. It is cheap and it is a very effective visual marketing tool seen by all of the property owners and business proprietors in the local area. Invariably, the top agents will have a strong signboard presence in the local area. As a priority, seek to get signboards on all of your listings as quickly as possible. When you place a signboard on a property, directly market their property into the local area personally. That means calling in on property owners and business proprietors to talk about the new listing. That simple activity will increase your market intelligence significantly.
The best listings to work on are exclusive listings. So often I hear agents say that they cannot achieve or attract exclusive listings. Top agents convert exclusive listings more than open listings; they do this because they are good at pitching and presenting their services. They are also well known through the local area as experts at what they do. Exclusive listings give you control of your market and the client; in this way you can achieve a better result over time. If you cannot easily convert exclusive listings, look to improving your knowledge and relevance to the clients that you act for. Seek to specialise, as this will help you build your exclusive listing profile. Practice your skills in presentations and pitching.
The Internet is well established as a critical component of commercial and retail property marketing. Most generic agents simply list a property and place it on the Internet hoping that the Internet profile and exposure will generate enquiry. There are many more things that you can do with the Internet to improve your listing performance, enquiry rate, and personal profile. Social media, article marketing, and blogging are very relevant and are highly effective tools when it comes to commercial real estate marketing.
The database that an agent utilizes will be the foundation of future business. Each agent or salesperson should be working with at least 600 prospects in the local area. The only way you can manage and work with such a large number of prospects is through an effective and up to date database. Managing the database should be a personal strategy and process that you undertake at the end of each day. Don’t to delegate the process to some administrative person in your office; failure to take ownership of your database will destroy your market share.
Cold call prospecting should be first on your agenda each working day. Contacting at least 20 to 25 new people at the start of every working day will help you improve market share radically and quickly. The other half of your prospecting process can be with people that you have made contact with previously. Balance your prospecting equally between new people and established prospects.
The secret to building market share as a good commercial real estate agent is in the systems and the consistency that you establish. Random actions produce random results. Develop your system including some of these critical items above.
If you want to get some more tips on how to find tenants to fill your vacancies in your properties, you can get them in our Newsletter.