Monday, July 22, 2013

Finding the Right Tenant Mix for Retail Investment Property

woman with shopping bag
Choose tenants wisely for your retail property.


In shopping centre management and leasing today, it is essential that you find the right tenant mix to encourage customer sales and tenant activity.

Every tenant that you place in a property should be carefully considered for product or service offering, together with their relationship to other tenants nearby.  That is where the tenancy mix process becomes really important.

So the message here is quite clear, the right tenancy mix can improve the property in a number of ways.  Consider these issues:


  • Successful tenancies underpin the market rental for the property.  They will also create a factor of attraction to other tenants considering occupancy.
  • A lower vacancy factor over time will improve the relationships between the tenants and the landlord.  Most tenants like to be part of a successful shopping centre.
  • A tenancy mix that has been matched to the local shopper demographic can be easily marketed to the community to encourage future sales and customer visits.


So the choice of a tenant to fill a vacancy is quite important.  At the beginning of every financial year, the property manager together with the landlord should make some observations about the market, and formulate some choices about tenant selection and placement for the coming 12 months.  This then simplifies the tenant replacement process when it needs to occur.

These rules or guidelines can be set as part of a tenant retention plan and the tenant mix strategy.  They are two separate and essential initiatives requiring consideration by the landlord.  When these strategies are developed, they can be merged into the business plan for the property and therefore considered as part of the bigger leasing picture.

In establishing a tenancy mix strategy, consider the following questions and issues:


  1. Some of the tenants in the property will do little towards property profile and market rental.  Over time those tenants should be replaced with better quality tenants.  It is a fact that a successful shopping centre will usually feature high quality tenants and a wide variety of products.
  2. Understand the relationships that your anchor tenants have towards your speciality tenants.  In an ideal world, both tenancy types should be moving towards a productive shopping centre relationship and an increase in sales.  Make the connections between your anchor tenants and your speciality tenants; market the property accordingly.  
  3. Remember the impact of seasonal holidays and festivities.  Market your property comprehensively to the shopping seasons and festivities.  It will be likely that you will need a funded marketing campaign for that; a marketing Levy can be installed and negotiated into the tenants leases as part of the leasing process.
  4. Review the surrounding properties for ideas when it comes to tenancy placement and selection.  Some of those properties will have strengths and weaknesses that are of value to your leasing decisions.
  5. Undertake a marketing survey of shoppers within the property.  That should occur two or three times a year so that you can understand the shifts and changes to the shopping patterns.  Most shoppers today are looking for convenience, value, and comfort.  It can also be said that the presentation of the shopping centre will have a lot to do with the attraction of shoppers to the property in an ongoing way.  The entire retail equation needs to be well managed.
  6. Connect with the local retail franchise groups, to see if any can be encouraged to consider occupancy in your property.  They will have standard terms and conditions that relate to their business model.  Those terms and conditions will also have an impact on the design of the lease for occupancy.


Given all of the above factors, look at the subject property to understand exactly how people enter it and move through it.  You will see areas of high traffic that will give you advantages when it comes to tenant placement and marketing.  Generally the entrance ways to a property and the zones of high foot traffic will be suitable for smaller tenancies and therefore higher rentals per unit of area.

You can get lots of tips like these in our Newsletter right here.