Shopping Network

When looking at a retail property it is important to look at the tenancy mix to see if any weaknesses exist in the current tenant placement. A poorly located tenant can drag down the performance of other tenants around them. That means a threat to rental and a potential vacancy exposure if the location becomes empty. Vacant tenancies are to be avoided at all cost if you want the property to perform well.

So here is a way of assessing the fundamentals of the property tenant placement.

So here is a way of assessing the fundamentals of the property tenant placement. It pays to use a checklist in the process so that all bases and issues are covered.

1. Firstly you need to understand just who the anchor tenants within property are. They are the tenants around which the property functions. They will be the main reason customers visit the property. The anchor tenants will contribute largely to the property image, so choose your anchor tenants wisely. Anchor tenants give you a long lease (typically over 10 or 20 years) but they pay a lesser rent average based on unit area measurement. A retail shopping centre will only have a small number of anchor tenants (1 to 3) and they will be strategically placed across the property to create flow of customers through the common area. The options for lease renewal with anchor tenants are an important factor for both the tenant and the landlord. If there is any potential for the anchor tenant to leave the property at lease end, then it could destroy the property identity and cash flow. Landlords have to cover the issue early with lease renewal negotiations or finding a new anchor tenant well before the current anchor tenant leaves.
2. Who are your major tenants? They are not always just your anchor tenants. Major tenants contribute to shopper interest and property visits. They supplement the anchor tenants but will not be as large as anchor tenants. They may be franchise tenants (although not necessarily). They are positioned between the anchor tenants on the traffic flows of customers. When you choose good major tenants you can create small clusters of tenants with complementary products or services. They become islands of interest for shoppers. Some major tenants will have sensitivity to being in proximity to certain other major tenants. The major tenants can trade off or through the trade of others, and experience in other locations influences their decisions and preferences in that regard.
3. After you have placed anchor tenants, and major tenants, you get to the decisions on specialty smaller tenants. They will fill in the smaller shops and extend the customer interest in and around the traffic flows. Specialty tenants are of the greatest value when they are placed in areas near major tenants that they complement. Specialty tenants can be destination specific as shoppers will visit them if the offering is very good and unique. Select specialty tenants that are well proven from other locations.
4. Convenience shopping is the next in the chain of tenant placement. Convenience shopping is centered on the daily needs of the community and will cover commodities such as food, bread, newsagent, butcher, fruit and veg. They will usually be placed in and around the supermarket anchor tenant.
5. So do you have a food court? Any decent shopping centre should have a food court to extend the stay and interest of the customers to the property. The food tenants will have to be controlled in their food offerings so you get the quality and variation of food that customers want. Not all types of food work in a food court, and the choices will largely be dictated by the surrounding customer base.
6. Do you have an entertainment type of tenant offering? In larger properties this will be cinemas or game type tenancies. They work the best when they are near the food tenants.
7. Access in and out of the property from the car park has to be convenient and safe. If customers do not get a feeling of convenience from the property then they will stop coming to shop. Take a walk around your property and do so from the car park as a shopper. See what a shopper would see; feel what a shopper would feel. A good retail property has to be convenient and fresh. The customers visiting the property should feel good from the event. Any frustration they could experience has to be lessened or removed.
8. Franchise tenants with a notable national identity are useful in a shopping centre as they will bring customers specifically wanting the offering or the brand. Space out the franchise tenants with local specialty tenants to achieve variation and interest for the shopper.
9. Always keep the image of the shopping centre and all the tenants at the highest possible levels. To do this you may need a property lease that supports approvals and controls relating to tenancy presentation and any changes. The landlord and the property manager can then enforce critical presentation decisions.

All of the above points reflect decisions and tenants that the community needs and wants. This says that you must understand the type of community around the property and what they want in local shopping.

A retail property is a vibrant living property investment that cannot be left to its own daily function. The best retail properties are well planned and organised with constant attention from the landlord, property manager, and leasing manager. The bond between tenants, landlord, customers, and property manager is critical to the success of the property.

Commercial trade has been part of our lives, right from the beginning of time. The modes of transactions and sales have been evolving from barter system to moneyed trade. The need to reach out to different markets placed far apart. It was this motive that fuelled the likes of the East India Trading Company of the British Empire to sail the high seas and sell their goods to people of new lands across the globe. At every stage the advent of science and technology spurred trade to new heights and many more innovations. The biggest innovation in trade today is E-Commerce. It is basically explained as the trade done using the worldwide web, i.e., buying and selling over the internet.

The sales due to this progress have reached unimaginable heights and traders have achieved unprecedented sales and profits. But the question remains – is online trade or shopping better than the high street or malls? A brief description of the benefits of E Commerce will help to clarify this dilemma once and for all.

From a consumer point of view:
The world of online shopping opens avenues to a consumer that in the previous days was almost unheard of. Consumers now can buy items that cannot be easily found in their local markets online. No matter what the item, some trader somewhere will always be able to provide you with it. But what is the use if that trader and this consumer cannot build a communication base. The websites of various products offered by traders the world over can be accessed by a consumer anywhere on the planet. Once the order is sent in the consumer can have the product shipped over easily and the trader can be paid via credit cards. This way the trade is completed quickly and efficiently and the consumer can thus purchase any product manufactured and sold anywhere in the world. The consumer can also compare prices of the same products and buy the one most suited to his budget. Also wholesale and clearance sale deals have broadened the consumer’s horizons to a large extent making him able to stretch his money a long way.

From the retailer’s point of view:
As a retailer, e commerce is definitely a boon. It has tremendously improved his customer base and thereby his sales and subsequent profits have soared. Some retailers have noticed that the sales of their products in the physical stores is not meeting the targets set out for breaking even or making profits. This occurs when the customers visiting the store are not really the target customers and therefore they have no interests in his items. Thus sales fall increasingly and if there were no other avenues from which he could make his scale he would have to close down his shop. Online shopping allows him to make up for the store deficit while still remaining afloat enough to service the local demand (however small it may be). Also every trader knows that the increase in footfalls will eventually increase sales. Online shopping increases the footfalls to such impressive numbers that failing at an enterprise online is quite improbable.

Recently the Kele Center, located on the island of Maui in the city of Kahalui, sold. The Shopping center is approximately 14,820-sq. ft. and sold at a price of $4,925,000. Anchored by Denny’s Restaurants, Super Cuts, Rent-A-Center, and Edward Jones, this well-located community center was a great investment for the new owners. The property is located just outside of the airport and down the road from Borders, Sports Authority, Lowe’s, and Costco. The property sits on a land area of approximately one acre. This Hawaii commercial investment will provide a nearly 10% return to the new owners of this property.

This is another example of a substantially higher rate of return (CAP Rate) than was achievable by investors just a short 24 months ago. While it did take a large equity investment in today’s financing environment, the owners will be rewarded for making a move at this time in the marketplace.

I believe 2009 and 2010 will be looked at as low points in the Commercial Real Estate cycle for Hawaii.

The Pearlridge shopping center and mall is the second largest shopping center in the State of Hawaii. This property has a great tenant mix and is well suited for the trade area it serves. Over the years, the owners and management have done a very good job of juggling tenants and providing an environment where tenants can thrive. The sales per square foot of the center are very high for similar and comparable centers. The mall is anchored by Macy’s, Sears, and a new Bed, Bath & Beyond store (the first one in Hawaii), as well as numerous restaurants.

This shopping center will sell in today’s market. It is located on a ground lease that will deter some investors in the marketplace because of the potential uncertainties of the long-term land tenure.

The past success of the center, the current tenant mix, and the strong, stable performance will attract a new owner to this property.

It is likely that that owner will reinvest in the property, as its last major renovation was over a decade ago.

With the lack of capital in the marketplace we expect that the buyer will demand a high rate of return and feel that at this low point in the market it will be rewarded handsomely.