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.
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.
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:
- The duration of the lease and the options
- Critical lease dates relating to lease occupancy and enforcement
- The levels of sales for the anchor tenant over the last three years
- The marketing plans and campaigns underway at the property and for the anchor tenant
- The dynamics of the anchor tenant and the specialty stores
- 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.