Symptoms to Watch for in Retail Tenant Mix Performance

female shoppers with shopping bags
Watch your retail tenancy mix for any shifts in trade or sales.

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.

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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.