Tenant Retention Plans and Strategies in Retail Real Estate Today

woman with shopping bag
Tenant retention plans will help you grow your retail tenant mix in the correct way.

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

Things to Do in Managing Retail Property Today

shopping centre people walking
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.

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