Shopping Centre – Strategic Factors
The success of retail investment property and particularly the Retail Shopping Centre depends on the key factors such as:
the size of local customer markets
the type of local customer and their spending habits
the level and nature of the average family income in that market area
the growth of the local community
the size and location of nearby competition properties, and
the exposure and access the subject property gets to roads and transport systems
The property investors owning retail property should keep a close eye on future of other Shopping Centres locally and any expansion or change they are to experience. The local planning approvals office should be monitored for any pending approvals which change the zoning of the properties in the region, and any approvals of new developments that could impact the way the community use other property locally.
So why do this? You are trying to protect your cash flow and the future of your property. Without customers, the rent and leases for your property will deteriorate. The levels of market rents in your property are underpinned by customers. You can sue a tenant that is not paying rent required under a lease, however the matter is much larger, and a poorly performing tenant can be the first sign of something much larger impacting the greater property.
Being sensitive to customers and tenants in a retail property is a major part of market awareness. When financial difficulties arise with one tenant it pays to check its origins and review the impact on the greater tenant mix in the property.
Property rental is precious and must be protected. The rental income generated on a retail property depends mainly on these internal and external factors.
the demographics and sentiment from the local and more distant community
the performance of local and national economies
customer ease of access and use of the property
customer acceptance of the property to satisfy shopping needs
the rental cash flow
the net income resulting after property operational costs
lease documentation type, terms, and stability
the mix and placement of tenants relevant to the traffic areas and entry points across the property
the clustering of tenants near each other to extend the spending of the customer
Any new investor to a retail property would assess all these issues with great scrutiny and diligence. They will impact the sales turnover figures for the property. If the shopping centre keeps turnover statistics for the tenants and customer counts from the entry points to the property, the figures will also be invaluable to landlord property analysis.
Here are some other things to consider in your property plans and strategy.
Anchor Tenants in the property should be well known in the community and support growth of ongoing trade for both themselves and the specialty tenants
Look for tenants that can achieve high sale volumes and support percentage rentals above the base rentals
Look for lease documents that support reasonable achievable rent levels and see if they have attractive escalation clauses that can be reached by the tenant without threat to occupancy and stability of trade
Some net rent lease documents will pass through a large percentage of operating costs of the property to the individual tenants thus removing the pressures from the Investor. This will provide protection to the Investor of any inflationary pressures which can occur in the future.
Retail investment property brings good returns to the investor providing they take an interest in the property future and base today’s decisions on tomorrow’s property performance. This property performance should give due regard to the relationships between tenants, landlord, customer, and community. That equation will optimise the property opportunity.