When it comes to leasing a retail shopping centre, the mechanism of leasing can be quite specific and specialised. That is why some leasing experts only specialise in retail property. It is a very special part of the property market requiring good market knowledge and excellent tenant contact.
A shopping centre or a retail property is a vibrant business environment and it needs to be understood for the best leasing results to be obtained. To a great degree, the success of the tenants will be generated from property performance, tenant mix, customer interaction, and the landlords support. There are many ways that these issues need to evolve if the retail property is to succeed for the long term.
Here are some tenant mix strategies to apply to a retail shopping centre to assist the leasing process and the overall tenancy mix.
The tenants that are chosen for the property should be the tenants that satisfy the demands of the local community and customers. Tenants that are well matched to the local demographic will attract more customers to the property over time. Tenants of this type should be integrated into the overall tenancy mix at strategic places and within specific retail clusters. Clusters of tenants generate more sales in the property. A cluster is a specific retail tenant mix strategy.
Get to know the franchise groups in the local area that may require premises in your property at any future time. There will also be other franchise groups that are not yet located in your region or town. Connect with all the franchise groups that have a reasonable retail offering and therefore potentially an attraction to your customer base. Understand what these franchise groups require of a property, and population demographic. They will also have certain terms and conditions that relate to their lease occupancy and property selection. In many cases they will share that information with leasing professionals in preparation for identifying the right property. Get to know the franchise groups.
Monitor the activity of all competing retail properties locally. That will include the rental profiles, vacancy activities, and lease occupancy. Selectively approaching the tenants within these properties will help you with market intelligence and leasing strategies.
Identify any new property developments that are soon to be released on the market. They are likely to shift the balance of available space and rental across the region. They will also try to entice tenant movement through attractive incentives. That can then make any older properties in the area less attractive to some tenants. The only way to combat this problem is through competitive rentals, and exceptional property performance. Retail tenants will always be attracted to properties that integrate well into their customer base. Make sure your retail property does exactly this.
Your existing tenancy mix will contain tenants that are more or less attractive to the future of the property. You will require a tenancy retention program to define the differences between those tenants. Over time the retention program can remove difficult tenants, reposition better tenants, and reduce your vacancy profile. The tenant retention program is a significant business tool and point of difference for many retail leasing experts.
So all of these things will help you with the necessary momentum to improve your leasing activity; over time you can lift your tenancy outcomes. Respect the differences in retail property leasing, and understand the specialised nature of lease negotiation. Many commercial property agents have made a significant and very rewarding career from retail property. You can too.
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 manage or lease a commercial property it pays to have a good filing system when it comes to the tenancy mix in every property. Every tenant should have a series of files that allow you to get to information fast and effectively. When things are happening in a tenant matter, you want to go the right file and get what you need to respond in a timely and effective way.
In properties with a lot of tenants, the filing system is highly important. That then brings me to another issue of just who looks after the files and places records and activities in the ‘right file’. If you do not file the right information, then the property management activities get difficult. When something goes wrong you simply do not know where to go, or you need a lot of time to get to an answer for the landlord or the tenant.
The trick to all of this is that you build a good property management and tenant filing system from the very start of the property management appointment.
Some may argue that you have the ability to scan documents and store them on some ‘hard drive’, and that is just fine, but the reality of the industry is that you do need some paper files to review and work with.
Here are some ideas to help you get your property management filing system up and running:
Each tenancy should have a correspondence file of current and past issues. This is where you go to look at letters and notes relating to current tenant matters. This file is also important from an historic perspective; you can go back and see what happened and how issues were agreed. This is really important where some tenants are not following the lease terms and conditions.
At the front of the tenant file, place a summary sheet of lease terms and conditions that you can quickly refer to in the case of a question or problem. This sheet should be inserted in the file at the start of any property management appointment and leasing negotiation. This information sheet should be updated as the terms of tenant occupancy change.
Any income matters of rent review, option, renewal, alterations, and rent splits should be entered into the property computer records using a standard template form of record. When this entry has been done, the form can be placed in the tenant file for future reference.
A copy of the lease and any other lease papers or licences should be held on file. Notice I said ‘copy’ and not ‘original’. It is not a good practice to keep original lease documentation in your office; if you have a fire, or if you lose the file the ramifications are not good especially if you have a lot of properties and tenants.
Any lease alterations and special billings for the tenant should be recorded on the tenants file for reference.
Good property records and tenant records will help your property management process. As your property management processes change, you can improve your systems and records.
The tenancy schedule is the tool of choice for a property manager or leasing manager in a commercial or retail property investment. It is the tenancy schedule that will keep the property manager up to task on forthcoming events and dates.
Often you find that the tenancy schedule is not up to date, so if anyone gives you such a document, treat it with the caution it deserves, and check it out completely before you act on the information contained therein.
So let’s say that you have a great tenancy schedule that you know is totally accurate. I get many questions about what I would want to see in a tenancy schedule. Here are my main priorities:
Details of the tenant name, lease, and full contact detail for emergencies
Tenancy identifier or suite reference that comes from the plan for the property
The area of the tenancy in m2 or ft2 (depending on your unit of measurement)
The % of the tenant area to the building net lettable area
The rent $’s per annum, per month, and per unit of measurement (m2 or ft2)
Lease start date
Rent start date
Lease end date
Term of lease
Option term of lease
Anniversary dates and reminders for rent reviews, options, expires, renewals, renovations, and make good obligations
Outgoings charges for each tenant on the basis of area and monthly charge
Outgoings budget for the building
Total outgoings recoveries for the property on a currency and % basis
Types of outgoings to be charged to the tenants
Insurance obligations of the tenant
Rental guarantee details or bonds held
Provision for critical dates relating to any important lease term or condition
Maintenance obligation details of the tenants
This list is not finite and you can add your own extra priorities, I would however make sure that it is totally correct and maintain it to the highest level of accuracy.
When you do this you can stay on top of important upcoming events that will impact the occupancy or rental of the property. Whilst you can buy ‘off the shelf’ software programs that display this above information, that can be quite expensive for those commercial and retail property managers that are first entering this type of property.
The alternative is to create some simple spread sheet that contains the data; in saying that, it is essential that great care is taken to maintain the spread sheet that you create. Any errors in the tenancy schedule can destroy your landlord, your business, your tenant, your reputation, and the property. Accuracy is paramount.