How to Boost Landlord and Tenant Relations in Commercial and Retail Property

foyer of retail shopping centre

The shopping centre and retail property markets 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 changing how property occupation works, and just what businesses need to lease premises successfully for the long term. 

Many businesses today don’t need to lease as much space as previously.  Many business people are completely mobile and attending an office daily is just not required for many reasons.  Customers and manufacturing are perhaps the only reasons a business or company would need a physical property ‘base’ to operate from.  On that basis, the landlord and tenant relationships of today are more important than ever before.

Relationship Rules in Investment Property

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 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.

The Secrets to Choosing an Anchor Tenant for a Retail Shopping Centre

shopping centre mall

Have you ever thought about what makes a shopping centre in Brisbane or Queensland so successful as an investment when other similar properties nearby are struggling?

 

There are generally 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 South East  Queensland know all too well the importance of the equation and the balance of it.  Neglect one part of it and weaknesses can develop.  A retail property can ‘degrade’ very quickly.

 

people in retail shopping mall

 

The Anchor Tenant Choice and Review

 

So, let’s look at the anchor tenant part of the equation.  When it comes to the performance of a 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 with a view to the future of not just the property but also the community of customers.

 

The Leasing Review

 

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 an anchor tenant in occupancy to ensure support and involvement in multiple ways.

 

retail shopping mall

 

Things to Check When Purchasing a Retail Shopping Centre

 

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 3 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.