When purchasing retail shopping centres or malls, the type of centre needs to be noted as well as its location, size in the lettable area, state and condition of the property, and types of shops, number of car parks and other features such as services and amenities that would attract customers. The property has to be relevant and friendly to the community. The property has to attract visitors and frequent shoppers. Look at any retail property from that perspective before you look at the rental income and the tenant mix.
Demographic factors should also be explored in the case of every retail property. For example, how is the population distributed about the centre? What are the growth rates and the spending power of the targeted community? Are there any roads and highways that can direct or restrict traffic about the property?
Records of turnover are invaluable in assessing past property performances, and the number of customers through the centre. A good retail property will have leases that support the supply of turnover figures to the landlord on a confidential basis. While the tenants may have a sensitivity to doing that; it is the only ways a landlord or property manager can assess property customer visits, and just who are the successful tenants.
Shoppers to a shopping centre will shop on particular days, and that will create peaks in trade. Have a look at other shopping centres nearby to see how they compare to the property you may have under consideration. Be mindful of the other impact of seasonal sales and holidays on retail trade.
Know the Property Comprehensively
The turnover in a retail property can be centred on a particular type of tenant, for example, fast food and fashion. Weaknesses in turnover can then be seen when turnover figures are categorised. If the tenant is not a high performer in the property, then it is best to consider a change rather than let a shop location loose customer interest. It is for this reason that a lot of landlords in larger properties will not give options when leasing premises to new tenants. In that way, they can preserve their choices in the tenant mix.
In this market, the levels of income in the property together with the outgoings have to be well managed. Rate of growth in outgoings and the rate of growth in rental income should also be noted. Read the leases to get to the bottom of what has happened over recent years. See what the leases say regards rent reviews coming up and how they can be handled. So there is a full review process here to implement when looking at a retail shopping centre as an investment. Are you ready for the challenge of the investment?