A retail property and particularly a shopping centre is a special asset in many different ways. It takes skill and knowledge to make something of property performance.
There are numerous things to put in the retail ‘balance’. Special strategies are required. Are you up to the retail challenge?
Understand the retail facts
So what are the variables that make this so challenging? Consider these for starters:
Tenants struggling to make sales – Some tenants will always struggle given that they may not be offering the right products or services. They may also be inexperienced in retail trade and sales. If you have a difficult tenant in a property it is perhaps better to move them on at the end of their lease (assuming that they can trade until the end of lease)
A tenant mix that just doesn’t work for one reason or another – A poor group of tenants with weaknesses will quickly slow customer interest and repeat visits. That weakness then leads to sales decline. You must quickly fix a retail shopping centre tenant mix if you have issues that are weaknesses and impacting property performance.
Vacancies currently in the property or those that can be expected – When you have empty shops to resolve, ensure that you are coming up with immediate strategies such as creating short term occupancy and placing marketing material in the empty space. Customers will see the vacancy so build some ‘vibrancy’ into the empty space.
Market rentals and strategies for the property – Understand what the rents are doing for the property type in your region. How does your property compare?
Outgoings recovery from the tenants – The lease documentation will be important when it comes to outgoings strategies and recoveries. The rent types used in the property will also have an impact.
Customers and their spending patterns – At different times of the year the sales results change for the retail sector. Watch the process and how it is impacting your tenant mix.
Lease documentation that is complex and critical to occupation – Understand all of the leases in the property. Some will be better than others.
Landlord net income requirements – The landlord will have expectations when it comes to the net income they achieve. The expenditure in the property will place pressures on cash flow. Understand how those things work in your retail property.
Retail sales patterns for the region – Always look at shopping and sales trends for the region. Understand if your property is being pressured by other properties locally. Understand why that is the case and try to fix the weakness.
The configuration and presentation of the property – It is a fact that any retail property will be higher in upkeep so costs and strategies will be required. The presentation and functionality of the property has to be at the standards expected by customers. In that way the customers can keep coming back to the shopping centre. A retail property will soon be in decline if maintenance and presentational factors and lacking.
Every one of these issues can demand specific focus and effort from you as the specialist broker to bring about a resolve for all concerned.
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.
In today’s commercial and retail property market, you really do need to develop a leasing strategy for each and every quality property that contains vacancies. The abundance of vacancies available means that the limited pool tenants available has a lot of properties to choose from. Attracting enquiry from tenants and then converting the enquiry is a real ‘art form’ in this market. Here are some more tips from our Newsletter for Agents.
It should be said that the marketing of any lease or vacancy should be on an exclusive basis. You should be appointed as the agent of choice to market the property for a period of time. Controlled listings are the only way to attract enquiry in this market today.
Given that the landlord requires leasing results in their property, the controlled listing is the only way to achieve the necessary commitment on the part of the agent and the necessary market penetration into the tenancy base.
It should be said that the client’s commitment to an exclusive agency should also be reflected in the agent’s commitment to market and service the listing. There is no point in taking on an exclusive listing of a vacant tenancy unless you truly believe that you can market it comprehensively and intensely for the period of the agency. The real estate world is full of disgruntled clients who have been tied to an exclusive agency and a poorly performing agent for a long period of time.
To provide an excellent leasing service for your clients today, here are some tips and ideas to merge into your leasing strategies and solutions.
When you act exclusively for a particular landlord, the property portfolio that they own should be subjected to a tenant retention plan and business strategy. In that planning process you can set the key criteria that should apply to ongoing leasing activity and tenant mix changes. When the landlord can clearly see the leasing road ahead when it comes to rentals and vacancies, they are more likely to stick with you as the leasing expert that they require.
The market rental in your local area will change from time to time given the supply and demand for rentable space. New property developments will place pressure on market rentals through the introduction of lease incentives and enticements. Keep your client up to date with some form of market rental update on a monthly or quarterly basis.
The expenditure or outgoings costs for a given property asset will be based on both controlled and uncontrolled cost factors. The uncontrolled cost factors are those that relate to property rates and taxes. Like it or not they will have significant impact on property usage and will need to be paid. It is the controllable outgoings that have some ability to be shaped relative to occupancy and building usage. As a leasing strategist and specialist, you can keep the client appraised regards current levels of expenditure and outgoings that apply to the particular property type. The trends of outgoings costs will to a large degree influence your rental decisions regards amount and rental type.
To be a top leasing agent today, you simply need to bring relevant leasing skills and local property knowledge to the client. Provide the best leasing service possible to your clients, and keep in touch with the local business community for the tenancy needs that arise.
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.
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.