In commercial property management today, there are many pressures and activities to consider on a daily basis across the tenancy mix, existing landlord requirements and targets, the property, and the investment requirements of the various stakeholders. (NB – you can get our commercial property management tips right here)
Given those critical facts, property managers are typically very busy on a daily basis, and as a consequence they can easily be distracted into the events of the moment. An ‘out of control’ property manager is a ‘disaster waiting to happen’ both for the client and the brokerage. That is why attention to detail is so important in the role and for each individual property manager.
Control all the Facts
Attention to detail in all of the property management disciplines is hard to maintain but will help control the issues and the events.
So what can you do here? When it comes to ‘attention to detail’, some things are more important than others for property managers and landlords.
What Should You Monitor?
So what are the property performance issues that should be optimized and controlled in this detailed way? Try some of these for starters:
Lease documentation – the leases that you have now in the property will support and direct the rental cash flow in different ways. Those leases have to be tracked so that all the elements of occupancy are correct and actioned. Most of those leases will be different in some respects, so do a full and comprehensive lease review by reading the documents ‘end to end’. Take notes of critical issues as you do that.
Tenant negotiations – understand the existing and upcoming tenant lease negotiations. Gather your required information well in advance so that you can start the negotiations in a timely and relevant way.
Tenant placement – don’t just put a tenant into a vacant shop. Make sure that it is the right retail tenant that offers the right merchandise for the location. Match the tenant into the tenant mix.
Rental cash flow – understand the rental types that match the landlords lease strategies and the current market conditions. Be ready to negotiate those rents as market conditions allow.
Arrears management – watch your arrears in a regular way. Don’t let them get out of control. Develop arrears strategies for any tenants that are worth keeping in the property for the longer term.
Budget performance – this involves both income and expenditure. Set the budget with due regard to incomes, leases, tenants, and local area supply and demand.
Vacancy factors – you will have vacancies to contend with, so allow for that fact in your property budget. Local area supply and demand will impact your leasing and vacancy alternatives. Watch the trends in the local area.
Property investment targets – the client will have targets and those targets should be at the center of your lease negotiations, tenant choices, market rental considerations, and expenditure planning.
Critical dates – watch the dates in your leases, and the relationships that those leases have to each other in a ‘timing perspective’. You don’t want too much volatility in lease dates and expiry dates in the one property.
A retail shopping center is a special place where the tenant mix just has to match the client and customer requirements for the location. If you make mistakes in retail tenant placement then sales and customer interest in the property will slow. That can only mean on thing and that is a decline in rent.
So there are issues to consider in finding the right tenants and placing them in the property. Certainly the landlord should have a say in what they think about tenants and tenant mix choices, but the center manager should give guidance to the leasing process and tenant placement.
In this audio program, John Highman talks about retail leasing and the important choices to be remembered in attracting and converting tenants to a retail property and or shopping center.
In retail property and shopping centre performance today, the tenant mix and the income created from the tenants in occupancy needs to be shaped and improved over time. That is where ‘tenanting mix orchestration’ is a useful skill to learn and to feed into the property investment strategy.
The suggestion here is that the tenant mix can be shaped and improved. That is certainly the case in retail property performance. That is your job. The landlord will benefit greatly over time by a well-considered and controlled tenant mix.
Every lease and every tenant in occupancy should be looked at in balance with the surrounding tenants, the shopper clusters, and the customer profiles. The terms and conditions of each individual lease should be negotiated to standards that match the investment targets of the landlord.
Anchor tenants – You have to start your assessment around the stability and business activities of the anchor tenants. Look at the lease conditions that apply to each and every anchor tenant in the property. How long are they in occupancy? What are the terms and conditions that apply to their occupancy? How can they integrate their business activities into the success of the overall property?
Customer profile – You can’t move your property to another location. On that basis your customer demographic will be specific to certain incomes, employment, and family profiles. Understand your customer base and how those customers like to shop locally. You may need to undertake a marketing study through the local area to get the most recent and up to date information about customer activity and or future needs. When you understand the customer, you can set the strategies in place for the ideal tenant mix and property profile. You may also be pulling in the customers from outside of the area through tourism and transient people.
Property design – Every property will have factors are designed to understand and integrate into the tenancy plan. Entrance points, common areas, congregation points, and transport drop off points all influence foot traffic and potential retail sales. The tenancy mix should be designed for customer interaction and sales improvement. That base strategy requires you to put the right tenants in the right locations. You will have a mixture of small and large tenancies to consider. You will also have tenancy locations requiring special consideration such as food retailing, fashion retailing, entertainment, and services. You can get plenty of ideas by looking at other comparable properties locally or regionally.
From these three simple concepts, you can set in motion a comprehensive tenancy mix plan and retail sales strategy. Understand the property, the tenants, and the customers. Balance at equation so that the landlord can optimise rental returns and minimise vacancies. That is what tenancy mix orchestration is all about.
Get our eCourse here for Commercial and Retail property agents and brokers.