Anchor Tenant Choices in Shopping Centre Investments Today

retail shopping mall

Have you ever thought about what makes a shopping centre so successful as an investment in Brisbane when other similar properties nearby are struggling?  There are usually a few things in the answer, including the landlord’s commitment to the property function and appearance, the tenant mix, the marketing program for the property and tenants, elements of community involvement, ongoing customer attraction, and the anchor tenant. 

You could say that it is a special ‘retail formula’.   It is a unique blueprint to balance and maintain; shopping centre managers and leasing specialists in Brisbane know all too well the importance of the equation and the balance of it.  Neglect one part of it and weaknesses can develop.  The retail property can degrade very quickly.

Expect retail sales to be important to your investments

Fundamentals of Retail Property Performance

So, let’s look at the anchor tenant part of the equation.  When it comes to the performance of the retail property, the anchor tenant selection and success will be fundamental to the performance of the property.  On that basis, you should choose your anchor tenant to the future of not just the property but also the community of customers.

Key factors to bring into the leasing decision in selecting an anchor tenant will be:

  • Required lease term (generally long)
  • Option term (also generally long)
  • Base rental or turnover rent provisions
  • The anchor tenant match to the customer demographic
  • Rent review alternatives over the lease duration
  • Marketing initiatives of the anchor tenant into the local area
  • Fit out designs and refurbishment covenants in the lease
  • Branding match to the property and signage for the anchor tenant
  • The integration of the anchor tenant into the property tenant mix
  • The lead time to exercise the lease option for the anchor tenant
  • Levels of trade expected and required for the success of the tenant

Anchor tenants can bring stability to your market rent levels and create lower vacancy factors.  A retail property with a good anchor tenant will support the specialty stores and underpin the opportunity of retail trade for everyone.    So, a landlord should work closely with any anchor tenant in occupancy to ensure support and involvement in multiple ways.

Shopping carts
Attract more customers to your retail property.

Things to Review in Shopping Centre Purchase

If you are looking to purchase an existing shopping centre with an established anchor tenant, ask these things as part of the due diligence process and lease document review:

  1. The duration of the lease and the options
  2. Critical lease dates relating to lease occupancy and enforcement
  3. The levels of sales for the anchor tenant over the last three years
  4. The marketing plans and campaigns underway at the property and for the anchor tenant
  5. The dynamics of the anchor tenant and the specialty stores
  6. The customer facts and figures relating to retail trading days of the week, the patterns to the visitor numbers to the property, and the seasonal sales throughout the year.

Information like this can help you understand the complete ‘dynamics’ of the retail property and its successes as an investment.  Look for the strengths and weaknesses in every situation with retail trade, the tenant mix, and the property performance.

Things to Know About Landlord and Tenant Relations in Shopping Centres Today

retail shopping mall

The shopping centre and retail property markets in Brisbane and Queensland are changing today, and that will reflect on how tenants create sales, attract customers, and grow their business over time.   The internet and the ‘online’ side of things are now changing how property occupation works, retail sales, customer interest, and just what businesses need to lease premises successfully for the long term. 

Many retail businesses today don’t need to lease as much space as previously required.  Sales per unit of area are now an important equation to be monitored.  It all comes down to a ratio of occupancy costs to Gross Turnover.  Different businesses have different ratios and the averages for the retailer type are worth understanding. 

money on weight machine
Rental money is only part of the retail shop and tenant equation.

Ratios of Rent and Occupancy Cost

Food type retailers tend to be at the higher end of the spectrum at around 15% to 20% of occupancy cost to turnover.  Those landlords that are seeking higher rent, will push the ratio up for the tenant, and that is not always sustainable for the longer term.

Conversely at the other end of the ratio assessment, fashion type tenancies are now seeing their profit margins fall and turnovers reduce (all due to the internet and sales occurring online).

Given these problems, landlords would be well advised to manage their rents to realistic and not aggressive levels.  It is better to have tenants paying a moderate rent for the longer term, than tenants closing their businesses due to lack of profit.  The value of landlord and tenant relations should be understood and respected.

woman holding shirt
Manage the retail shops and tenant mix in a positive way.

How a Landlord Can Work With Tenants

The extension of this is that a landlord should work with their tenants in a positive and consistent way.  How can a landlord encourage positive tenant relations?  Try some of these for starters:

  1. Regular meetings – this sounds logical, but it is surprising just how ‘random’ many landlords are with tenant contact.  They let the contact go until something starts to pressure the tenant relationship or the occupancy.  When the ‘pressure’ is on, lease negotiations are always harder, and the alternatives to solving a lease problem will be less for both parties.
  2. Create comprehensive leases that work for both parties – the lease document supports occupancy and income stability.  When you look at it from that perspective, how a lease is created should be carefully considered.
  3. Clarify and control critical dates for all leases – this is a planning process of an advanced and positive nature.  Critical dates coming up with any leases should be watched and tracked at least 18 months out from the ultimate date.   That is how you can stabilize an investment property.
  4. Be flexible in tenant mix alternatives – if a tenant is under pressure, then look at the variables of expansion, contraction, or relocation.  There are ways to solve a tenant lease problem related to local business pressure.
  5. Understanding property use – for the investment property to thrive over time financially, the use of the property must be optimized.  There will be a balance between common areas, leased areas, car parking, and services.  The owners of competing properties of the location will always be seeking to attract tenants.  All the more reason to stay close to your tenant mix and property occupancy.
  6. Occupancy is not just about rent – collect a fair and reasonable rent for the property and the location.  Aggressive and high rents force people away from a property.  Look at the bigger picture of property occupancy costs including rent and outgoings.  How do they compare to other properties in the location?  Preserve your tenant mix by keeping occupancy costs in the ‘fair and reasonable’ zone.
  7. Negotiating leases early – if a lease matter is coming up (option or expiry), it is timely and sensible to negotiate any lease matter early.  Don’t wait for the lease date to arise before you start discussing things with the tenant. 

So, these are valuable ways to work with tenants and preserve lease occupation in commercial or retail property.  Improve your investment property and stabilize it by negotiating with and consulting your tenants in a positive way.  Their business success will be the foundation of your real estate investment and its performance.

How to Optimize Shopping Centre Performance in Brisbane

retail shopping mall

There is a change evolving through the retail shopping centre ownership and investment market in Brisbane.  Around Australia and in Queensland you can see retail indicators growing and shifting. 

The stronger retail properties stand out as the ‘performers’, and the weaker ones can lose their retail customer base all too easily.  The successful retail properties today are notably in categories of either:

  • Regional
  • Neighbourhood
  • Destination
  • Tourism integrated

The competitive nature of retail says that a shopping centre should be optimized in all ways possible, so the customers keep coming back.

woman with shopping bag
Know your shoppers and their requirements

Improving a Retail Property for Customers

How can you strengthen your retail property and its category or customer attraction?  Positioning is so important to attract customers to the retail offering, and in supporting the tenants with potential sales.  Don’t let your retail property become ‘mediocre’.  Failing tenants or poor sales will produce higher vacancy factors.

Neighbourhood shopping centres will of course always exist, but the shaping of the tenant mix is critical to capture the local shoppers before they engage with regional retail offerings. 

The retail customer base today is more ‘mobile’ and will easily travel to the retail property where they can get the products or services, but more importantly the entertainment.  Shoppers like to feel good and be ‘entertained’ as they conveniently shop locally or regionally.

If you own a shopping centre or are considering the purchase of one, consider the positioning of the property now and how it could be ‘strengthened’ in its category and for its location.  Get positively involved in the future attraction of your retail property.

Where can you start with that? Choose the category of retail that should apply with your property and its demographic, and then boost the tenant mix, the customer attraction, and then the market rent.  All factors are linked.  It is a retail equation for landlords.

Shopping carts
Attract more customers to your retail property.

The Base Plan for Property Improvement

As an extension of that idea, here is a ‘base plan’ for retail shopping centre optimization:

  1. Support tenant retention with quality tenants
  2. Reduce vacancies before they appear
  3. Balance the tenant mix for quality
  4. Market the Shopping Centre comprehensively
  5. Know the local property market and customer base
  6. Apply local area marketing online and offline to the customer base
  7. Engage with your tenants frequently
  8. Watch your outgoings costs and comparisons for the area and property size

As a final note, the entire sector is shifting with the pressures on retailers from the internet; customers like to purchase some goods and services ‘conveniently’ online.  This directly says that the landlords of shopping centres should consider all the strategies behind their tenant mix, shopping centre operations, lease management, marketing, and their income base. 

Choose the right tenants for your shopping centre that can form the basis of customer attraction over time.  Protect your asset and its investment performance over time.

Why Commercial and Retail Property Managers are Special People to Help Investors

city highrise buildings

Many property owners in Brisbane think that they can manage their own property and some invariably do, albeit at times poorly.  It’s a common problem.  There are just too many things in property performance today for most situations of owner management to be completely successful.  

Many owners of investment property make property management choices based on cost first and legality or practicality second; that then leads to risk, redundancy, and low-grade investment performance.

Costs of Property Management

Are the cost savings in self-management worth the trouble for a landlord?  Perhaps in a simple single tenancy management the owner self-management process might work; as however, a property becomes more complex with several occupants and or leases, a professional property manager is a better solution in most cases. 

There are plenty of agents around with property managers on staff, however that is where another problem evolves; the experience of the property manager may not be relevant or deep enough for the particular property type and or client.

Challenges of Property Management

Let’s take things a bit further.  There are always challenges in commercial and retail property management.  Think about these things for starters:

  • Negotiations with difficult tenants on leasing and occupancy matters
  • The gathering of comparable market evidence from other leased properties
  • Strategic tenant retention and lease negotiation
  • Vacancy marketing to reduce the problems of loss of rent
  • There are differences to consider in office, industrial, and retail property management

There are other things to add to the list. Rarely will a property owner have enough exposure to the local property market to really understand what comparable situations, vacancies, rents, and prices are currently. 

The property owner can also make mistakes with lease and tenant matters simply because of a lack of understanding when it comes to up to date lease interpretation, and full property market information. 

shopping mall

Things to Look for in Property Management Today

Here are some other key elements of market intelligence that are critical to the property management process.

  1. Latest updates on property types and market rentals for comparable properties.
  2. Access to a local business database of tenant enquiry across property types.
  3. Knowledge about lease incentives in today’s market and how they impact a new lease deal
  4. The ways that a vacant tenancy can be marketed for best enquiry and lease occupancy
  5. The different situations of gross and net rental that can bring benefits to the landlord and their investment situation
  6. How to qualify tenants in the current market.  Some tenants will not share their full business details and or lease requirements.
  7. Knowledge about levels of outgoings in the local area and how they are structured into new leases today

So, there is a message here.  A good property manager or real estate agent with a large team will understand these things and help the property owners appreciate what is possible with the investment property; that will then allow strategies to evolve. 

people walking in shopping mall
Understand the complexity of retail property performance.

An experienced property manager or leasing expert will also make clear recommendations about how to minimise the risk of vacancy and the time on market with existing vacancies.  Its all about strategy and experience.

When occupancy is sorted for the property owner by a chosen property manager, the other issues of property performance can be escalated into a strategic property plan.  Those issues will be prioritized including:

  • Lease documentation review
  • Tenant meetings and interviews
  • Contractor interviews
  • Property handover checklists
  • Critical date assessments over the coming leases and investment cycles
  • Income and expenditure reviews for budget performance assessment
  • Maintenance planning to allow property compliance and safety planning to codes
  • Vacancy reduction plans
  • Tenant retention plans
  • Refurbishment and capital works programs

So, there are plenty of reasons for a property owner to seek outside assistance in managing their property; it’s worth the money and the fees paid.  The only question now left to investigate the is if the property manager has the experience and the business disciplines needed to control the asset efficiently for the future.

How to Find Tenants Faster in Commercial Investment Property

shopping mall and retail shops

When your property becomes vacant it can be a real worry.  It is the same for any landlord in Brisbane and in greater Queensland.  As the online pressures shift and change, the way companies transact business today has a direct impact on property occupancy, be that in leasing or ownership.

Why is that?  Companies today are more ‘mobile’ and the sales force can spend most of their time out of the office.  Everything that they need to create new business, or place and order is typically in the ‘cloud’.  The size of average office premises for a given today is smaller than what it would have been five years ago.

So, that then presents some problems. In precincts and property locations it can take some time to find a new and willing tenant that has the integrity and business stability to occupy a property.  That leasing process means loss of rent, loss of outgoings recovery, incentive costs, legal documentation costs, commissions in leasing, and the list goes on.  

Market Coverage is Important

A good commercial real estate leasing agent that has a solid coverage of the local property market can be of great value to a landlord today.

So, what can you do as a landlord with your investment properties?  You must stay ahead of the vacancy problem and have a good strategy in place to minimise the vacancy downtime. 

Even in tough markets, vacant tenancies do lease, it’s just that it takes more time and effort on the part of the agent and or the landlord to promote and target the property to the right prospective tenants.

Retail Shopping Mall and tenancies
Retail shopping mall and tenancies have an occupancy focus.

A ‘tenant retention plan’ is a good solution for most investment properties.  In a ‘retention plan’, specific strategies are created such as:

  • Closer connections with existing tenants to ensure full awareness of leasing pressures and business changes.
  • Creative lease transactions that are designed to match the overall mix of the property whilst avoiding mass or multiple expiry problems with several tenants or premises at the same time.
  • Targeted tenant profiles of local businesses to simplify the leasing process when a vacancy is known to be happening or upcoming.
  • Direct marketing of vacant space early, so that enquiry is optimized for vacancies at the right time.
  • Incentive packages that are structured to encourage existing tenants to stay in a property.  There are different incentives available, and a package or alternative packages can be created to suit investment targets in the property.
  • A forward matrix assessment of all tenants in an investment property to allow lease expiry awareness and early negotiation.  That matrix is typically a forward-looking assessment of occupancy looking out to 18 months from current time.
  • Leases that are matched to the investment targets of the landlord and the valuation requirements of the property financiers.

As a landlord, and if you have premises to lease, do not make your choice of leasing agent based on discounted commissions, lower fees, low marketing costs, open listing, or friendship.  None of these things will really help you lease your vacant tenancy any faster.  The result is an expensive and protracted vacant tenancy that is ‘eating its head off’ financially in vacancy downtime and costs.  Your losses will far exceed any gains you think you may get from savings on commissions or fees.

What are the Property Strategies?

When you need an experienced real estate agent to help you lease a retail or commercial property, or any property for that matter, ask them to give you their strategy on:

  1. Advertising to a target market that is relevant to the vacant property
  2. Internet listing initiatives to attract more enquiry
  3. Track record leasing similar local property
  4. Lease terms and conditions that attract tenant enquiry
  5. Database email circulation of your vacant property for lease
  6. Cold calling the business community to attract enquiry from the right business owners
  7. Street by street canvassing of businesses for greater information about your vacant tenancy
  8. Signage initiatives that show the vacancy to its true advantage
  9. Target marketing the property locally
  10. Inspection strategies designed for your property

Such a short list and some yet critical points that are so important when you are leasing property or seeking to resolve vacancies.  You can do so much with these things from a leasing perspective providing your commercial real estate agent supports the process and provides the depth of experience to get the job done.

City Buildings
Know the Brisbane Property Market

One final comment and going back to one key point above; open type listings in a tough market are also a waste of time for the average landlord.  The numerous agents that have your property listed as part of an ‘open listing’ are not really marketing your property intensely.  It is what is called a ‘list and hope’ process when it comes to open listings.

Proven Agent Performance

If you want to lease your property in the shortest possible time, find an agent that has real proven experience in the local area using the 8 points above.  Ask questions about what the agent will do for you.  Get them to show you how they will attract the market to your property.  Make them win your business.  Good real estate agents will do this and give you the confidence you expect as a property investor.

I go back to the point that leasing a commercial or retail property is not about getting discounts from the chosen agent.  It is all about market coverage and strategic approaches to the right local businesses.  A timely lease agreement is more important than any ‘discount’.

The Importance of a Signboard in Commercial Real Estate Marketing

city buildings on morning sky

When you list your property for sale or lease in Brisbane, one of the questions that you will be asked by the nominated brokage agent, is if you want a signboard on your property.  I highly recommend a signboard for one very good reason; it is so effective in immediately tapping into the local property market. 

Brisbane is a vibrant and active city on the Australian eastern seaboard.  It is becoming a ‘gateway’ of products and services into SE Asia.  People interested in local commerce drive through the precincts constantly. It is a property investment ‘hub’.

The seaports and airports in Brisbane are surrounded by industrial and commercial properties serving commerce and manufacturing in Queensland.  The precincts of Eagle Farm, Newstead, Port Brisbane, and Tradecoast, are all thriving precincts are also supporting businesses trading internationally through sea, air, and road transport links.

So, the signboard on your property is quite important.  There are people in and around your commercial investment property that want to know about the sale or lease.  Use the signboard to connect with them.

Important Property People

Who are those people?  For starters they will be:

  • Nearby business owners
  • Local tenants that may need to expand, contract, or relocate premises
  • Investors seeking to expand or change their portfolio

Very often when a signboard is placed on a property in Brisbane, the phone starts to ring within a few hours.  The local businesses and the local property investors will see the signboard and invariably want to know what is going on with the property.  They will consider your property from their perspective with their needs in mind, and that is what you want.

The signboard is therefore one of the cheapest and most effective methods of marketing a property that there is.   Add to that the convenience of the available internet advertising today and you have a basic marketing campaign for your Brisbane property at low cost. 

Value for Money in Property Marketing Today

Where is the value for money in marketing commercial real estate today? Consider these questions:

  • What does a signboard cost?  A few hundred dollars for a generous signboard.  The signboard is a silent promoter of your property in an ongoing way.
  • What does the internet cost?  Can be a few hundred dollars to a few thousand dollars, depending on advert placement, size, and message.  There is long term value in internet-based marketing placement.

It is interesting today to remember that newspaper advertising for commercial and retail property is less effective and still very costly.  Most people that want to sell, purchase, or lease a local property will go to the internet first and will see the signboard as they travel through the local area.

Advertising your property for sale or lease does not have to be expensive or complex.  Simple marketing with effective channels of marketing is all that is required.

Retail Tenant Contact Cycles for Better Investment Property Performance

retail shopping mall escalators

When you own a commercial or retail property, it pays to keep in close contact with your tenants.  They are a key part of the property performance and should be nurtured to stabilise income from the property. 

Build a tenant retention plan to boost your tenant stability.  Have reasons to talk to your tenants and do so frequently.  Build positive and strong relationships with your tenants.

As part of keeping in contact with the tenants in your property, you can create a tenant contact plan that formalises the meeting and any feedback that may happen as a direct result. 

Highly Performing Properties

Many larger landlords in high performing properties will create and hold tenant contact meetings with all tenants at least every 90 days.  In retail property this cycle is shorter given that a retail property is a very active type of property investment and changes happen all too quickly with property pressures and retail sales.

So just what can and should you talk to your tenants about?  Try this list:

  • Need to expand premises
  • Need to contract premises
  • Maintenance needs in the property
  • Interaction with other tenants in the same building
  • Exercise of lease option
  • Use of the building
  • End of lease issues
  • Renovation or refurbishment plans
  • Insurance
  • Terms and conditions of their lease and compliance to that

It is interesting to note that good tenants are constantly being networked by other property owners and real estate agents in your local area.  More reason to keep in contact with your own tenants to make sure they are happy in occupancy.