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 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.
Retail property performance is a fine balance of a number of relationships between the tenants, the landlord, and the community. When the balance is correctly established and maintained you can see the retail property and the tenants thrive.
In pressured times like that of today where retail trade is impacted by the internet and economic sentiment, the retail property manager has to be very close to a number of key issues in their managed property. In that way they can stave off many of the problems that can occur with the property over time.
Here are some factors to monitor and address:
Tenants with lower levels of stock should be observed and questioned. The lower levels of stock may be the result of a recent stocktake sale, or they can be the result of a shift in sales results. You are looking for tenants that are not performing well in sales or that are changing their service or product offering to that which is not permitted under the terms of the lease.
Changes to the staffing of tenancies and businesses will be an indicator. If the employees in the tenancy business are under constant change, it is wise to understand what is going on and why it is happening.
Tenants that need to relocate should be worked with. If their business is under pressure, it is better to achieve a process of cooperation to help them in stabilising. Any alternative is likely to involve a protracted vacancy and that is not going to help anyone.
Tenants that do not maintain presentation of premises or stock will drag down the other tenants in close proximity. Quality lighting and good levels of presentation are really important in retail property.
Clustering advantages or pressures in a property can help you either way when it comes to sales and tenant mix. Look for the tenants that can build sales from each other. Build clusters of tenants that work for you. The results will be a stronger market rent.
Anchor tenant weakness or trade problems should be addressed quickly. Any customer perceived weakness in the anchor tenant will soon reflect in a property decline in sales.
Lower levels of sales in the property or with some tenants will be a concern. The sales in the property should be tracked by tenant and by tenant category; in this way you will see how the property and the tenants are tracking in the local community seasonally.
Shifts in customer demographic will produce a change in sales. Look for those changes and help the tenants to act early. Profile your community at least once per year and ask the customers what they expect from the property and what they like about it.
New property developments to occur in the local area will detract from your customer base. Watch out for new properties coming up for sale or lease that shift the balance of supply and demand.
Higher incentives in getting a new tenant to your property will occur from time to time depending on the supply and demand for local retail space. Be flexible and adaptable when it comes to incentives for new tenants.
Competing properties in the local area can be taking some or all of your trade. Monitor these other properties frequently and watch for changes in the anchor tenant offering or levels of trade. If the anchor tenant changes, it is likely to shift the retail balance in the entire local area, and other retail properties.
Aggressive landlords that attempt to push the rental of the property too high can threaten the tenant mix stability and the viability of a tenants business to operate. Tenants will soon spread the word of any difficulty with the landlord, and that can have an impact on the property overall and any future leasing requirement.
A retail property is a special place for shoppers and tenants. Manage your retail property well and with a base strategy that encourages trade for all concerned.
If you want more tips on retail property you can get them in our newsletter on this site.
When it comes to retail property performance, the tenant mix is a critical part of the leasing strategy. Well placed and selected tenants will help you as the property manager build the customer experience for the property. The end result is a property with:
Low vacancy factors
Good levels of customer visits
Optimised market rental
Solid enquiries from the local business community for leasing
All of this means that the landlords property can perform well in the current economic climate.
Property managers and leasing managers should make the tenant mix strategy a key part of the annual business plan for the property. Some good ideas to merge into the plan would include the following:
Base rental levels around which new leases can be created
Types of rental that allow the landlord to recover a good part of the property outgoings costs
Standard lease strategies that set targets on lease terms, options or renewals, makegood clauses, rent review processes, rent review types, etc.
Strategies of tenant occupancy that support the anchor tenant in the property
Early renewal processes for tenants that are desireable for ongoing occupancy in the property
Clustering of like type tenants so you can build off the sales activity of each tenant
Tenant optimisation is a result of a great tenant mix plan and its implementation.
Landlords, tenants, and property managers are all part of the property performance package to underpin a retail property performance.
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.
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:
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.
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.
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.
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.
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.
If the local area is serviced by public transport, get some marketing material and posters into the transport systems and drop off points.
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.
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.