The neighbourhood shopping centre is the first level of retail investment property and is closely integrated to the community. The tenant mix should be of a convenience shopping nature. That will be the key to its success.
When designing your tenant mix strategy for the neighbourhood property, think about convenience and basic needs of the immediate community. Is the surrounding community growing and in what way? What do they spend their money on and how frequently? Are they younger families or older retired families? These questions dictate how they will spend their money.
Sometimes to really answer these questions you need a survey undertaken from the surrounding homes and families. They know the neighbourhood better than you do and can usually tell you what the community thinks about the property and what it is missing.
Once you have your answers to these basic questions you can then move on to finding the right tenants. As you do, give due regard to nearby competition properties and new property developments as they will have an impact on your property.
Once you know who you want for your tenant mix and property, it’s time to pursue them:
- Set up your target businesses by type. Given that your property is convenience in nature you will likely need tenants in the categories of fast food, fruit and veg, baker, newsagent, chemist, hairdressing, liquor retailer, smaller supermarket. Choose your tenants well with due regard to established trading history from other properties.
- Cold-call the small family businesses in the area and particularly in competition properties as they will likely be interested to talk to you about your offering. They will also tell you about the performance of the other properties. This market intelligence is invaluable.
- Follow up with the property managers and franchise managers or retail franchise chains. Cracking into a well known retail chain might take several letters and follow-up phone calls. The seeds of interest you plant today may take weeks or months to germinate but consistency and persistence will get you through the door.
- Follow up with the supermarket chains for relocation or new premises opportunity. The supermarket industry is highly competitive and most chains would like to keep the opposition away from getting into their ‘patch’. The rentals on the supermarket anchor tenant are lower than the specialty tenants and they will be selective on paying their share of outgoings for the property, but you will get an anchor tenant for a long lease term to support your property. Choose well.
- Pay attention to the local media in new ways, with ears and eyes open for business prospects. Even in a slow economy there are businesses that are successful. Convenience shopping does not disappear; it just changes priority and offering to the shopper. Read the newspaper daily, listen to the radio and watch your local TV stations not just for business news, but for ads from retailers that seem successful. You’ll find out who’s growing, who’s moving and who (by their absence) is almost dead in the water.
- Use local telephone books, the internet, industry groups, chamber of commerce directories and publications from local economic planning offices to tell you who’s who in the marketplace and who might be interested in moving. Make the calls and ask the questions. It is the secret to building a great tenant mix for your property.
- Visit other shopping centres at different times of the week to examine the operations of potential tenant prospects. Learn to think like your targeted retailer, understanding the operation’s strengths and weaknesses. Know what it’s like to turn the key in that shop and what it takes to stay in business.
- Always return every phone call from a prospect or an enquiry. A potential tenant with a dynamic operation may be prospecting you and your property. It doesn’t matter how off the wall or strange a person or idea sounds. You might find some gems of occupancy among the strange and different ideas.
- Know your trade patterns for the subject property, and that is peak trading days, traffic patterns across the property, popular established tenants, how the community uses the common areas, how the car park supports quick access to the property for the convenient shopper.
- What is the branding of the shopping centre and do you need to do any face-lift upgrades of common areas? Tenants will not move to something that is degraded, lacks identity, and is poorly maintained. Poorly presented properties are a common problem in owner managed premises where the owner is inexperienced or at the smaller end of the investment scale. You must spend money on the presentation of retail property, otherwise the rental, customer interest, and tenant base will diminish.
- It is likely that existing tenants and potential new tenants to a property will talk before any decision is made to accept a new lease offering. Tenant harmony and relations is therefore critical to future property occupancy and rental success. Happy tenants usually mean good property performance.
Understand how real estate leasing brokerage can fit into the overall picture for the shopping centre. The leasing broker or property manager can always open the door to valuable prospects, but it’s up to you to also sell the shopping centre and its future in the community. When you know the community well, you have the keys to a great tenancy mix and property performance.