A vacant tenancy in a retail shopping centre can be massive drain on retail business and customer sales for all the tenants surrounding it. For this reason a vacant tenancy has to be resolved quickly and efficiently.
If you have too many vacant tenancies in the one property it can set the foundation for a decline in retail trade. Customers like to visit a property that is attractive, vibrant, convenient, and that has the required tenant mix. Vacancies can impact that profile.
Over time a decline in customer sentiment will have an impact on market rental for the landlord. Your primary focus in leasing and managing a retail property should be to maintain occupancy at a sensible market levels.
To lease a vacant tenancy some real strategies are required. In a ‘rising market’ the leasing process is not so much of a problem, but in a ‘slow or declining market’ the vacancy challenge can be significant. Here are some rules to help the process.
- Stay very close to the existing tenant mix and the leases supporting that mix. Some tenants will from time to time have challenges and problems in business or occupation. Keep communicating with the tenants regularly to understand their challenges and help them through any occupancy issues. In a ‘down’ market, a vacancy can be very hard to lease. It can be a drain on rent and outgoings for a very long time.
- Make sure that you are working well in advance when it comes to lease renewals or option negotiations. Most leases will have time provisions that apply to the renewal or the option process. That being said, there is nothing to stop you working earlier with the tenant to achieve a satisfactory renewal or option agreement.
- Some existing tenants in the property may require expansion or relocation. Be open to their business needs, and identify alternative locations within the property that may suit or solve the expansion or relocation problem.
- Review other properties in the local area that may be competing with you and your tenancy mix. Look for the challenges and the opportunities existing in their tenancy mix. Approach their more successful tenants to see if relocation is possible.
- Given the sales performance of your current tenancy mix, look at the segments that are quite successful and the others that are not so. There will be reasons for a tenants result in sales. It could be the product or service offering, the tenancy location, the tenant themselves, or the marketing process. Some of these things can be solved through careful management procedures.
- Monitor the clustering affect within your property where some tenants seem to be feeding sales off each other. The mix can be improved through improving the clustering process. Identify the tenants that can work with each other with the same customer type. For example, a coffee type tenant could be placed alongside a ladies fashion tenant and a ladies shoes tenant. A coffee tenant would be extending the customers time in the general area and potentially the sales potential.
- Consider the placement of the anchor tenants in the property and how they interact with specialty tenants nearby. Proximity to the anchor tenant will be a leasing advantage for some tenancy types.
- Create a tenant retention plan that encourages ongoing occupancy for those priority tenants in the mix. The retention plan will also help you when it comes to replacement strategies and removing poor performers from the mix.
- Leasing decision should be based on available occupied space, the prevailing market conditions, market rental, lease incentives, and occupancy costs. Stay ahead of these industry trends and challenges. Look for any new or upcoming property developments that could interfere with or change these factors.
If you do have a vacancy in the property, and a long term lease seems to be difficult to achieve, look at all short term occupancy opportunities with some of your other tenants, or casual tenants from elsewhere. Short term occupancy at a lower rental will still help you achieve the vibrancy in the property and maintain the customer’s interest.
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