Tips for Doing a Tenant Mix Analysis

When you manage or lease a retail property, the tenant mix will be critical to the property performance over time.  As a leasing manager or property manager for the landlord, you really do need to plan the placement of your tenants and have solid reasons for any new lease or tenant to be introduced to the property.   Here are some ideas from our Newsletter for Retail Property Agents.

This planning should be done at the beginning of each financial year as part of the business plan for the property and where you have just finished your income and expenditure budgets.  The tenant mix changes have relevance to the following:

• Lease expiry dates that are expected from the tenants in the property now
• New leases to  occur with known or current vacancies
• Expansion or contraction of tenants within the property
• The renovation and relocation issues that have impact on the tenancies during the year
• Market rent reviews and lease options
• The clustering plans that you have with like type tenants in similar locations in the property
• The placement and activities of the anchor tenants in the property

So, all of these factors will have impact on the property in some way or form.  That is why they are merged into the business plans and marketing plans for the property during the business year.

When you get the tenant mix right, the rentals for the landlord are optimised, the vacancies are minimised, and the tenants get more sales.  The equation is critical to retail property performance.

Not all tenants will be ideal for the property or the customer base.  At time of lease negotiation it pays to ask questions regards some or all of these matters below:

1. Will the new tenant serve the current customers with immediate needs?  Understand if you have other tenants in the property selling the same product or service, and if they are currently successful with that.  Introducing another tenant to the property could destroy the trade of the existing tenant.  There will be limits on just how much trade and sales you can get for a product or service currently.
2. Be aware of the current shopper demographic and understand just how that is catered for in the existing tenant mix.  Will future and expected changes to the shopper profile and local community give you growth over the coming years?
3. Where are the existing properties that compete with your property and how does that impact your property and tenant profile?  You will need to visit these other properties regularly to see how they are tracking with sales, vacancies, tenant mix, and customer visits.  It will be necessary to profile those centres and properties on different days of the week and at different times of the year.
4. Are any new property developments expected in your area that could shift the balance of the customer and the sales that you get currently?  New properties are likely to be a threat to your rental base and heighten your vacancy factors.  Keep your rents in check so your property is better value for existing tenants.  You already have customers, and the new property does not.

When you keep a close eye on your tenants and the property performance, you can strengthen the income profile for the property over time.  As a general rule, look 24 months out so you can track potential property changes and make the necessary shifts in strategy.

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