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Tips for Doing a Tenant Mix Analysis

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Devote time to your tenant mix strategy and 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.

Need some more ideas?  Join our Newsletter right here.

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Things to Do in Managing Retail Property Today

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Develop your system to manage retail property today.

When it comes to managing retail property and most particularly shopping centers, you really do need to know your tenancy mix, your landlord’s intentions, the demographics of the local area, and the customer interaction with the property.  Here are some tips from our Newsletter.

The success of a retail property will be built around those four factors and on that basis a dedicated management style needs to continually monitor the success and the progress of the property in the following criteria:

  • Understand the tenancy mix with regard to its offering and relative success.  Within the tenancy mix there will be clustering and placement issues relating to the tenants and how they interact with each other.  A lot of success can be gained by placing like type tenants near to each other so that the shopping intentions of the customer can be continued in the same zone within the property.  Keep the customers spending in the same zone of the property with similar products or associated products.
  • The leases within the property underpin the income profile for the landlord.  The income can be in various rental types including gross rental, net rental, turnover rental, and outgoings recoveries.  They all impact the cash flow for the landlord and each tenant will have a different relationship to the landlord with these rental payments; the relationship will be reflected in the leases.
  • The success of the retail property is highly geared to the interests of the customer and the return shopping that they may do.  You need customer to come back frequently and generate more sales and purchases.  At least two or three times a year you should be surveying the tenants and the customers to understand their interests and observations regard the property itself.  When customers start to lose interest in the property, the tenants start to suffer and the landlord will lose rental.  On that basis you have a marketing role when it comes to promoting the property to the community.
  • When it comes to retail tenancy space, it is advisable to monitor the sales activity of the tenants and the tenant groups.  In this way you can identify if any tenants within a group are underperforming and then take steps to resolve the problem.  If for example one food tenant was making far less sales than the other food tenants nearby, you know that something needs to occur to make sales improvement in parity with the other occupants in that category.  It may be that the tenant in question is simply a bad choice for the property, however this needs to be identified and solutions need to be developed.

A retail property is a dynamic and diverse type of property asset.  It is not something that the first time property investor should look to acquire until they have the experience.  For that matter it is also not the easiest property for the first time property manager to manage.  Only experienced people should get involved with retail property after they fully understand the complexities of property performance and income optimization.

There are many other things that you can add to when it comes to the above list.  Importantly are systemised management process works very effectively in Retail Property.

Need some more ideas?  Please join our Newsletter here.