How to Optimize Your Tenant Mix in Shopping Centre Management

shopping mall

Most tenants in a shopping centre today are of the smaller business type. The tenants are usually centred around a ‘family business’. They thrive when the shopping centre is performing well; they struggle when the reverse is the case, given that it is the only location or one of just a few that they operate from.

It stands to reason that a successful shopping centre is built around well-chosen tenants that are trading at good levels. So, if you manage or lease a shopping centre today, the tenants that you communicate with are the foundation of property performance and occupancy.

  • Can you improve your tenant relations this year?
  • Are you watching the lease and occupancy changes at the property and are you prepared to negotiate leases early? There are things within that to think about.
woman and filing cabinet
Get your commercial property systems organised.

Work the Tenants and the Mix

Keep in close contact with all the tenants in the tenant mix, and watch the interaction of anchor and specialty tenants in the property from a customer and client perspective. Then look for the tenant strengths and weaknesses and work with both. Tenant weaknesses can be resolved, and the strengths of a few tenants can be optimised for the greater benefit of the entire property.

Here is a tenant contact management plan that could be used in most retail properties over a 12 month period:

  1. Look at all the leases coming up for expiry in the next 24 months. Decide what tenants you would like to keep and those that are not quite as high on the priority list for ongoing occupancy.
  2. Package up some lease offerings for your ‘A Grade’ tenants so you can renew their leases early.
  3. Create meetings with all your major tenants on a monthly basis.
  4. Meet with all specialty tenants at least once every 90 days
  5. Create minutes of tenants conversations and meetings so you can react to or action any important issues early
  6. Look at the dynamics of the tenant mix and how the various merchandise groups are performing in comparison to each other.
  7. Create tenant management guidelines and lease negotiation documents within your retail property business plan. You can monitor your actions and decisions within that concept every 90 days as part of the property performance ‘check-up’.

So, these items form the basis of a tenant management plan and tenant retention plan in retail property. Forward planning like this will help you optimize the overall property performance and the selection of tenants into the future.

Things to Look at When Leasing Commercial Property

If you are a landlord in Brisbane and wanting to lease a property to a new tenant today, it pays to fully understand the leasing and vacancy competition that you are up against.  Let’s face it, tenants are looking around at everything that is available, and they are more selective in making a final decision. They generally know what the rents are doing, they know what their cost limitations are, and they can generally ‘shop around’ for the ideal vacant premises.

What’s Your Leasing Focus?

So, what are your priorities in leasing premises? What do you prefer out of the following?

  • A tenant leasing space?
  • A high rental?

It is sometimes difficult to achieve both points of focus in the one leasing transaction. A good lease with a new tenant should be a priority. A ‘fair’ rent is the best way to attract a lease and tenant arrangement. The escalation of rent over time can then be improved by a rent review strategy.

city hi rise building
Understand the leasing market in commercial real estate in your location.

Today’s property and leasing market in Brisbane provides a broad selection of vacant space to the active tenants in most locations.  The vacancy rates in the local property precinct can make your selection of rental a key part of the leasing process.  Add to this some other leasing decisions such as:

  • Lease term
  • Option availability
  • Base rental
  • Rent reviews
  • Rental type (gross or net rent)
  • Outgoings recovery

Expert leasing advice is critical here.  Leasing a vacant tenancy is not just a simple decision.  We guide our clients through some key decisions like those above so that the best lease can be created given all other property factors and pressures in the local area.  Timeliness is important in getting a property leased today.

What Tenants Do You Want?

As a property owner and investor, you will sometimes be actively seeking a new tenant to fill a vacancy in your property.  The best way to market the vacancy is through the dedicated efforts of an experienced real estate agent that is working for you on an exclusive agency basis for a period of 3 or 4 months; that is generally how long it takes to tap into the target market for the property and find the right tenant. 

The exclusive agency method gets the agents full focused efforts during the time that the listing is promoted.  If the property has not leased by the end of that time then something is frustrating the leasing process (such as high rents, poor quality premises, abundance of lettable space available or poor location)

Let’s say your marketing of the property has just commenced.  The adverts are on the internet and you have a signboard on the property.  Enquiry is good and inspections are occurring.   So along comes a new tenant; and then another and yet another.  All of a sudden you have 3 tenants all looking at the premises and soon the offers come in.  So the question is just who do you choose as your tenant to take the premises and why?

The issues involved in leasing decisions are complex and involve many long term issues.  The reality is that the best tenant is not always the one that is paying the highest rent; it is the one that is producing the best cash flow over the lease term (plus other things).  To analyse that fact you can do a net present value (NPV) analysis of the passing income from the lease taking into account the key factors from the lease over its duration such as:

  • Start rent
  • Lease term
  • Rent review methods and timing
  • Value of incentive provided
  • Cost of money (%) over the term

That will give you a better reason to select one tenant over another.  Interestingly the tenant with the highest NPV will not always be the one with the highest start rent.  It is the long term package and rent review structure that matters and you will see that in the NPV number calculated.

Choosing the Best Rentals for Your Investment Property

city buildings at night

When you own commercial property in Brisbane, the decision of rental type will arise from time to time, when you are ready to do a new lease with fresh tenants.  Prepare for the situations of a new lease so that you can find the right tenant and transact the lease effectively and directly at the right time.

It is a competitive property market today, and tenants are sometimes hard to find and difficult to negotiate with. Ensure that you have the total tenant and lease negotiation control from the very start through a proactive rental strategy of lease marketing.

What type of tenant do you want in your property?  Not all tenants are equal.  Not all tenants can pay the same rent regardless of the property and its location.  Don’t focus just on leasing the vacancy; focus on the best tenant that will support the asset and the investment plans that you have.

retail food court
Know your property and your tenant mix

Take the property and the vacancy to the market with a defined lease strategy considering other competing properties in the location. Review all the other lease properties in the location so that you can position your vacancy for the best enquiry and the best opportunity.

The rental question will be between a net type rent or a gross type rent in the leasing process.  The decision you make should be driven by:

1.         The rental standards set in the local property market for a property of that type
2.         The requirements of the tenants in taking a lease
3.         The age of the building and the expenditure trends based on recoverable outgoings
4.         The expectations of the landlord in cash flow management

These 4 simple facts will help you with the choices to be made on the lease rental.  If you need other help, an experienced local commercial property agent or property manager will have some answers.

Given that you must live with the rent amount, lease type and the tenant for a long period of time, it pays to fully consider the rent choice and make the best decision before you proceed.  Property investments are a product of choice and strategy developed over time.