Real skills are required and special people should be dedicated to the process of providing specialised services to investors and company owners.
In this audio program, John Highman talks about the special and unique skills required to manage a commercial or retail property today. Learn how to grow your brokerage business from a base of management activity and property management clients.
Property Facts and Controls
When you completely understand the strategies behind property management, you can develop special services across asset performance including the following:
– tenant retention
– income enhancement
– lease negotiation
– expenditure management
– net income generation and cash flow control
– lease administration
– maintenance management
– risk minimization
– renovation and refurbishment activities
– vacancy minimization
So there are many concepts and strategies within this list. If you take each individual concept, there are many specialised services that can be provided to your clients and customers.
In this audio program, John Highman talks about the importance of commercial and retail property management in brokerage performance today. Learn how to improve your brokerage business and the future commission opportunities available in your town or city.
The shopping centre management process is quite special in so many ways. That is why only certain brokers and agents take up the challenge of retail leasing, management, and sales. There are things to know and things to do. The benchmarks and the indicators are different in ‘retail’.
The goals and targets that are standard to the retail process are usually improving income, reducing vacancy factors, and keeping your good tenants for the long term. You could say that they are the major internal factors of property performance for a typical retail property or shopping centre today.
Know the Retail Factors of Influence
So what else do you need to think about? In addition to the nominated items, there are the ‘external factors’ that are harder to control. The external factors are typically shopper spending patterns, shop visits, frequency of shopping, and the amount of money spent on average per shopper. The marketing of the property will be part of the overall plan.
You can now see why a property performance plan is really important in any retail property today. So let’s put some of this together.
To keep all of these things in balance and on track there are a few business factors to implement in the running of a retail shopping centre. Here are some of them:
Develop a business plan – A business plan in retail shopping centre performance is and should be all encompassing, generally covering all the issues of the daily running of the property and the involvement of tenants, customers, and investors. With a good business plan, you can make choices when it comes to rentals, tenant movement, renewals of leases, and property expenditure.
Know your tenants and their priorities – Some tenants will be trading more successfully than others. Look for the differences to see what can be done with trading and sales. It is wise to look into gross profit and net profit margins with any tenancy group. The averages will tell you if a tenant is trading more successfully than others.
Review all of your leases – The shop lease is the foundation of income recovery and growth over time; with all leases you must know how they work and what is involved in enforcing lease conditions when matters of change or risk occur. Each lease is different so you will need to build a profile of the tenant’s lease and the critical dates. Track the critical dates so you can take action early in any issue or problem.
Establish a tenant retention plan – Differentiate your tenants so that you are protecting and encouraging the best tenants to stay in the property for the long term. They may need encouragement, so a tenant retention plan lets you set the rules to the process.
Watch the sales and trading figures – You can watch these figures if you have the cooperation of the tenants in the property. You can gain and protect that cooperation through the terms of the lease. From those figures you create graphs that show moving annual turnover (MAT) and sales in merchandise or retail segments. Ideally the tenants in the property should have to produce turnover figures for their shop on a monthly basis. From that point it is easy to see the retail segments that are selling products well, and also the other segments that may be struggling. That is where the tenant placement and tenant mix then has a valuable strategy for the property. You can build clusters of tenants around the property so that customer interest is encouraged and sales are boosted between like or complementary tenants.
Develop a marketing plan for the shopping centre – A plan of this type will allow for the retail sales seasons at different times of the year. There will also be themes for the local area and customer interest.
Reduce vacancies with a tenant retention plan – The only reason you need vacancies in a property is when you are about to renovate and move tenants around. A few vacancies will give you the flexibility to change the property. When you look at the total tenant mix in a property, some tenants will be more important than others to the future of the asset. That is where the tenant mix plan comes in; you decide who you want to keep in the property and for what reason. You then build a rent a leasing plan around those factors.
So there are some good things that you can do here with retail shopping centre leasing. Understand the property in a comprehensive way. Then you can match the property strategically into the location and the customer demographic.
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.
In retail leasing, you really do need to know your territory and tenants. The retail business segment is under some pressure at the moment in many respects. The internet has changed the way shoppers buy goods, and the spending patterns of people have changed due to the global economy.
When times are tougher in retail shopping and trading, it is the ‘convenience’ type tenants that still do quite well. Convenience tenants are usually food and consumable related (baker, fruit and veg, butcher, chicken, and fast food).
To help your shopping centre trade and thrive in tougher retail times, you need to closely look at your tenant mix and the clustering of tenants. Everything has to be done to encourage more trade for tenants and between tenants. Tenants should be selected on the basis of relevance to your local shopper and their needs.
As a retail leasing expert you can get close to the retailers and the business community. This will help you find the right tenants and the successful traders.
Here are some ideas to help you build a matrix of retail leads and opportunities in retail shop leasing.
Franchise groups are a proven business model. Some of them will suit your property and shopping centre. Talk to the franchise groups to understand what it is that they need in a property to consider occupation and leasing. Find out what their business model is and the standard lease terms and conditions that they require. Some franchise groups may also not be located in your area and may be looking to enter the region. Make some telephone calls and ask the questions of the right people.
Business owners in the local area know so much about the local businesses and the community. Approach the business owners and the wholesalers or manufacturers of retail goods and services. Through that contact they may give you some leads for talking to successful retailers.
Existing properties in your local region will contain successful tenants and businesses. Check out those properties and talk directly to the tenants. Some of those tenants will be quite successful even in a slower retail cycle.
Shopping Centres and Shopping Centre Managers will offer lots of retail leasing leads and needs. Shopping Centre Managers will have leasing needs in their properties from time to time. Their tenant mix will change and the property may expand or undergo redevelopment. Either way, retail leasing activities will follow in some form or another. Most shopping centres have a business plan and a tenant retention plan, in addition to standard lease strategies and lease marketing efforts. Get to know your shopping centre managers for the leasing needs that will arise.
Landlord owners of retail properties and retail shopping centres need experts in leasing to help them. This is where specialisation in retail leasing is so important. You can fill that requirement with some specialised industry knowledge and leads.
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.
When it comes to your career as a retail leasing expert, market knowledge will help you greatly when it comes to market share and market dominance. The retail property market is quite specific and special. There are many factors to consider and be aware of the as part of the specialized leasing task.
Retail property today is experiencing some challenges. The shifts in retail spending and due to the pressures of the Internet are quite apparent. There are also other pressures on retail that apply due to the global economic downturn.
That being said, retail spending doesn’t disappear, it just changes. That is why a retail property experts and particularly leasing specialists are perhaps some of the most skillful in the property market. They know what works and what doesn’t.
Here are some factors that require constant attention as part of servicing the retail leasing industry and shopping centers today.
It is wise to have a solid awareness of the significant and larger retail properties across your region. They will have pressures of change, refurbishment, expansion, and contraction. Those pressures will have influence on nearby competing properties and the movement of successful tenancies between each.
Franchise groups are now on a significant part of retail property performance. In many respects, they require occupancy opportunities in certain locations and property types. It pays to keep in close contact with the franchise groups for this very reason. They will have critical criteria that must be satisfied when it comes to a new tenancy and property occupation. They will usually share this information with the other retail leasing experts that could assist them with finding another tenancy. It is all so common for those retail groups to provide their own special lease documentation. Whilst this is convenient, it also has some concerns for some landlords. If you are involved with a lease negotiation of this type, the landlord for the property (your client) should have a good property solicitor acting on their behalf in the scrutiny of the franchise lease document. In most cases, the franchise lease document will coincide with the terms and conditions of the franchise business agreement struck between the franchisee and the franchisor. Landlord flexibility is required to make this balance work.
Rental strategies in retail property will vary from property to property and location to location. The rental for a tenancy is simply not just the commencing rent. It is a combination of many things including the commencing rents, the rent review profile, any lease incentive, and outgoings recovery. The right combination of these things will help improve the occupancy for the tenant and the landlord.
In any retail property, the tenancy mix will be important to the stability of occupancy and relationships between tenants. In larger shopping centers, this problem manifests itself in many ways. It pays to consider the clustering of tenants in zones within the property. In this way you can build on the sales relationships between like tenants in the cluster.
Retail leasing experts will usually spend significant time in the marketplace reviewing the performance of nearby properties, and meeting with retail tenants. These factors will produce market intelligence and feedback that allows the retail leasing expert to bring experience and relevance to the clients that they act for.
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.