To manage a shopping centre effectively and efficiently, the shopping centre manager needs to be knowledgeable but also time efficient. There are many pressures to balance as part of the property management process.
In an average working day, the following activities are some of the big items that will usually require attention on the part of the manager:
Collection of rental relative to the leases
Connecting with tenants regards day to day matters
Ensuring that the customers to the property receive the correct services and experiences
Marketing vacant tenancies within the property
Staying on top of the critical dates relative to the tenancy schedule and the existing leases.
Maintaining the property physically as to maintenance and essential services.
Balancing the tenancy mix with an affective a business plan and tenant retention plan
Reporting to the landlord on a regular basis regards income activity, expenditure activity, and rental arrears.
Marketing the property from a customer trade perspective to improve sales across the tenancy mix
Finding new tenants for the property based on the requirements of the mix and the upcoming vacancies.
So there are many things to do when it comes to managing a retail property. The larger the property, the more challenging the workload and the diversity.
It should be said that the larger shopping centres will usually have a team of people splitting the key issues of the property into different disciplines. When that happens, the cost of the staffing structure will be built back into the recoverable expenses for the property. It is quite normal for the centre management cost structure to be a recoverable item within the lease documentation.
So here are some strategies to help Retail Property managers stay on top of the workload and the challenges of the job.
Create check-lists for processes. You can have check-lists across leasing, maintenance, reporting, tenant mix, tenant contact, budgeting, and landlord contact. The same process can apply when it comes to property handover.
Start the day early, and get the difficult documentation and paperwork out of the way. The first 3 hours a day should be devoted to paperwork and processes.
Where ever possible, delegate key tasks to members of your team. A successful retail property will be built around the strengths of the team, and the professionalism of communication.
Document everything when it comes to tenant and landlord contact. Over time the notes and the event recording processes will support you in the case of any litigation or negotiation.
At the beginning of the week, hold a team meeting where you can cross reference critical issues across the property, within the tenancy mix, and with the landlord. Create an agenda for the process, so that you can stay on track with critical issues. Follow things through where complex issues apply or negotiations are continuing.
The income and expenditure activities within the property will be important in many different ways. Tenant occupancy, lease structures, and critical dates will all have an impact on cash flow. Understand all of those factors as part of providing a top service to your clients. Stay ahead of the critical dates and be prepared for the negotiations that follow.
A successful retail property is one that is managed effectively, efficiently, and correctly. Give due regard to occupant and customer safety, as well as the rules and regulations that apply to building codes and essential services.
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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.
When it comes to leasing commercial and retail property today, franchise tenants are a special opportunity for property agents. These franchise tenants already have a proven business model, established business brand, and good track record. On a regular basis those franchise tenants are going to be looking for new premises as part of the expansion of their network of operations.
Landlords and Commercial property agents should work closely with these tenant types. To get that process underway, visit surrounding suburbs and towns. Look at the established franchise brands in all property types. See if those brands are already located in your territory or if they would consider a move or an expansion in that way.
So we need to set some rules here:
Franchise tenants know what they want by way of premises given that they understand their customer profiles and ideal premises configuration and location.
The leases used in these circumstances are likely to be a variation of the standard lease used by the franchise tenant.
The lease term will need to match the duration of the franchise agreement.
The branding and signage of the tenancy will require consistency that suits the property but also attracts customers. Brand consistency is really important when it comes to premises choices and occupancy with franchise tenants
Commercial and retail real estate agents can do very well in working with this segment of the market. Get to know the franchise groups and what they are looking for in property type and location.
Here are some questions to ask and issues to work with that can help you with this type of tenant:
What type of property best suits their operations now and in the future? Pay particular attention to expansion and contraction needs. The tenancy may have specific challenges when it comes to ongoing occupancy within their franchise agreement.
What locations are best suited to growth of trade and business? In can be that main roads or highways have something to do with property choice. Property and business exposure can help the franchise group within its branding.
Where will their customer be coming from and why? You will need some local population and business demographics to help you here.
Check out the competitors for the franchise tenant. Whilst the tenant you are working with will already have a good idea about their competitors, you also should seek to understand those market factors.
The rental structure for the tenancy will be a balance between the requirements of the landlord and the cash flow structures of the franchise group. The franchise fee will be an added cost in the viability considerations of the business in occupancy. The landlord will still want a market rental for the premises based on prevailing market conditions. Most franchise groups will take between 5% and 10% from the gross trading figures of the tenant. It is wise to ask the tenant for their cash flow projections based on occupancy costs, expected levels of trade, and local business conditions.
You can do very well as a commercial or retail property agent when it comes to working with these tenancy types. It is simply a matter of understanding and specializing with franchise brands. You can then identify the right properties that suit their business activities and projections.
It is important that every commercial property has a lease strategy to support ongoing cash flow and reduce vacancies. These strategies should be integrated into the business plan for the property and for the landlord.
It is of note that a single lease for a new tenant should not be looked at in isolation. It should be looked at broadly with due regard for the surrounding tenancy mix, the income required for the property, and the impact that the long term occupancy may have from the initial term and into any option period agreed.
Here are some ideas to help you consider the leasing of a commercial property:
Assess the local area for competing properties. Some of those properties may be taking or attracting your tenants now. Look at those competing properties to see what is happening when it comes to vacancy profile, tenant mix, expansion and contraction, and the lease marketing strategies. Your property will need to be equal with, if not better than, those competing properties.
Assess the market rental through the local area so that you can create attractive lease packages for incoming tenants. When it comes to leasing, the start rent is not as important as the cash flow over the lease term. The starting rent should be regarded as something of attraction to create lease occupancy.
The rent review structure over the lease term will give strength to the cash flow for the landlord. The best way to assess ongoing cash flow is through the calculation of the lease and its net present value to the landlord for the duration of the lease. You are therefore assessing the income over time, not just focusing on the rent today.
Some landlords prefer not to give options for renewal. This is certainly the case when it comes to a quality or larger property where the landlord wants to retain flexibility in the tenancy mix. Many landlords of the larger shopping centers will avoid giving options to tenants for ongoing occupancy. The reason for doing this is that they like to move tenants in and around the property based on tenant mix and clustering. When they move the tenant, they can improve the overall cluster and general area including the other tenants. This will then have further benefits for the overall income return for the landlord.
When you negotiate the necessary rent reviews in a lease document or new occupancy, mix the rent reviews appropriately so that the landlord gets a sensible and realistic increase in net rent income. The rent review methods available will be variable such as market rent, fixed dollar increase, fixed percentage increase, or something that is indexed to the consumer price index. You can make the right choices based on the property type, the landlord, and the legislation or property laws that apply to lease occupancy with that tenant situation and property type.
If you manage or lease a property with a number of tenants in occupancy, look at the overall lease profile and expiry dates over the long term. Any lease that is to be expiring inside the next 18 months should be focused on now for lease renewal, lease expiry, tenancy change, expansion, or contraction. Start talking to your tenants early so that any appropriate changes to the occupancy can occur with measured and structured negotiations. Whilst the lease document may provide for certain other time frames on lease renegotiation, there is nothing to say that you cannot start this process early.
Keep in close contact with the current tenants in your property. They will have pressures of occupancy and on that basis it is better for you to work with those pressures than let the tenant move to another nearby competing property. Keep talking to your tenants on a monthly basis to understand exactly what they are thinking and doing as a business. Help them stay with the property for the long term if it suits the landlord’s situation.
The leasing of a commercial or retail property is relatively straightforward when you follow the rules. You can create a checklist with the above matters and other things relative to the property type. Control is everything when it comes to making a lease strategy and structure successful for the landlord.
Tenant retention is a critical part of retail property leasing today. Every good retail property should have a tenant retention plan in place to preserve and protect the income from the rental in the property.
Every commercial and retail property leasing specialist should have a specific approach when it comes to tenant retention and lease negotiation. It is a specialist process and it does command a good fee. Focus on the quality properties and clients when it comes to providing the service.
Here are some ideas to help you build a tenant retention strategy into your commercial and retail property agent’s services.
Review the current property market so you can understand the market rentals that apply to current lease negotiations with new tenants. That market rental will have some relevance on the lease negotiations with sitting tenants.
Identify the types of incentives that are available to influence new tenants to relocate. Those incentives are likely to be of interest to some of your tenants as they consider staying in your property or relocating to another. The landlord of your property will need to be prepared to provide incentives to sitting tenants.
Split the tenants in your property into the categories of good tenants and redundant tenants. At the time of lease expiry, it is the good tenants that should be encouraged to remain within the property on new favorable lease terms and conditions. The redundant tenants or those that are of little benefit to the property overall should be vacated given the circumstances of lease termination that apply. There is no point in keeping bad tenants in a property as it will have impact on the other tenants in the mix and the income profile.
Consider the requirements of renovation and refurbishment that need to occur in the common area and within certain tenancies. These factors will need to be merged into your lease negotiation, tenancy placement, and relocation plan. In many respects, a tenant should be responsible for their internal renovation requirements as part of ongoing occupancy. They may however try to push the issue to the landlord as part of a new lease negotiation.
Develop lease standards that should apply to most lease transactions. Those terms can be recommended to the landlord and approved for future use as part of renegotiating any lease or bringing a new tenant into the property. The lease terms should include market rental, the type of rental, incentives, rent reviews, and option terms. Making clear decisions with regards to these matters will help you when it comes to finding new tenants and understanding how they can integrate into the tenant mix and lease profile.
Look at the balance in the property between anchor tenants and specialty tenants. Carefully assess the tenancy mix profile with regard to each, and the stability of the anchor tenant as it applies to the local customer demographic. Stay close to your anchor tenant or tenants to ensure that they integrate well into the function of the property. Get your specialty tenants involved in the seasonal sales activity of the anchor tenant.
As a general rule, all rent reviews and option negotiations should occur early. This then says that you should monitor the critical dates in all current tenancy lease documentation for that very purpose. Stay well ahead of the critical dates that are coming up. Be prepared for the negotiations and brief the landlord accordingly.
So these are some other things to get you started with a tenant retention plan. You can graph the tenant movement and tenant profile in your property. When you make the right lease decisions in a timely way, the income for the property is protected, and the vacancy profile is minimized. That then produces a great tenancy mix.
Tenant retention today has become an important strategy in property performance, particularly with retail shopping centres and retail investment properties. Every commercial and retail leasing agent should provide a comprehensive and detailed tenant retention strategy to those property owners that need the service, or own the larger properties.
A good retention plan will give you as the retail leasing specialist opportunities for future leasing, renewal negotiations, tenancy relocations, and property changes. All of that means better commissions.
A leasing expert in this market is of high value to any landlord with a high quality retail property. This leasing churn produces fee opportunity and market intelligence. Most property owners and landlords will not have the tools or the market intelligence to design their own tenant retention strategy in this regard.
So a good tenant plan will have particular factors to help property performance, and strengthen the tenant profile for the landlord. Ultimately this will encourage rental income and lower the vacancy factors.
Here are some factors to help you establish the retention plan in properties and listings of suitable size and complexity.
Get to know the existing tenants within the property. This will normally involve meeting with those tenants to talk about customer activity, customer trade, and property requirements. In most circumstances, the tenants within a retail property can give you significant and valuable feedback to help your plan creation and consolidation.
Get professional surveys undertaken of shoppers using the property on various days of the week. In medium to larger shopping centres, it is quite common for the survey to occur on a quarterly basis. The survey would normally take two weeks to implement so that you cover the necessary variables in daily shopping. The results of the survey will tell you what customers are looking for and what they think about the property today.
Visit the local council or planning approvals office to understand the activity of other property developments coming into the market soon. Obviously you should look for new property developments that could destabilise the balance of supply and demand when it comes to tenancy leasing.
Review other properties in the local area to understand their factors of vacancy, market rental, and customer base. You can also selectively talk to some of their tenants to get feedback regards shopping trends and property performance. Obviously it should be said that this approach should be suitably confidential and sensitively handled. Many other property managers and property owners may feel threatened if you make this process too public or obvious. Simple questions asked in a creative way as you purchase a newspaper or an ice cream can give you some good tenant feedback to work with.
Given your existing retail property, determine the tenants that are more attractive and less attractive to the future of the asset. The attractive tenants will feature in the retention plan differently and more intensely. Some of the less attractive tenants will disappear from the plan when you can find better ones.
If you have an anchor tenant or perhaps a few anchor tenants in your retail property, it pays to talk with them regards property trends and sales. They will give you valuable feedback from their perspective as a major retailer. Most leases with anchor tenants go for many years. Make sure that the tenant is locked in for the longer term and that they are well integrated into the overall tenancy mix activity.
So these are some of the foundational factors that will help you move towards a good tenant retention plan. Over time you can consolidate our real strategy across the entire tenancy mix.
A retail property is quite special when it comes to tenant mix. In many ways the tenant mix will shape the future of the property. The success of the market rent for the property will come from the relevance and stability of the tenant profiles and the anchor tenants in the property. Are you an expert in all of these things?
In saying all of this, if you are a retail property manager, shopping centre manager, or perhaps a retail leasing specialist, you really should spend time on understanding the factors that strengthen a tenant mix profile in a retail property. In this way you bring better value and knowledge to your clients and property owners.
Retail property leasing and performance is really the pinnacle of skill and speciality in investment property today. Most of us that know the retail shopping centre industry well, find retail property very interesting and challenging.
A successful retail property is a balance of many things; as a retail specialist, you need to know what those things are and how to work with them. Good clients pay well for top retail property agents to help them.
Here are some of the important factors that come into a tenant mix plan and tenant retention plan for a retail property today.
From the outset you must know what your customers want and how the property interacts with the local community. For this reason it pays to survey your customer base and find out what they think of the property and its tenant offering.
Talk to the tenants in the retail property. They will have factors that they can share regards shopper requirements and buying patterns. Also note that some tenants will have different ‘stories’ to tell in this regard given their retail offering and position in the property layout.
Work closely with your anchor tenants so you understand just what they are seeing in shopper buying patterns and movement. Integrate the anchor tenant to the specialty tenants in the property to optimise mutual trading advantages.
Do you have common areas in the property where people and shoppers are encouraged to congregate and spend time? Do you have a food court in your common area layout that will help the shopper retention factors in the property?
Look at the lease terms and conditions for all the tenants. As part of the tenant retention plan it pays to negotiate any lease renewals early so you know just how much vacant space is coming up for renewal; then you can plan how you want to use it.
Expansion and contraction factors in a retail property are always happening. Some tenants will need more or less space; that is why you should create and how you should manage your tenant retention plan. Look after the good tenants in the property and manage the poor tenants out of the property at the end of their lease term. Over time the market rental can be underpinned by better tenants working in cooperation with each other.
Should you give tenants any options for a further term in a lease negotiation? Not necessarily is the right answer. The final decision on lease options will be based on the overall tenant mix, the property renovation requirements, and the landlord’s investment plans. Most large shopping centre owners do not like giving options for a further lease term given that it takes away a lot of control that they would otherwise have in a shop location and its position in the tenant mix.
Some of these factors can give you real control on the future of a retail property. Formulate your tenant plan and put it into motion. Over time this will help your retail property perform more effectively as the retail trading environment and economy shifts and changes.