How to optimize your tenant mix analysis

In a retail shopping center, tenant mix analysis is still the most important part of property performance. When you get tenant profiles and the well-balanced mix, you can drive more sales to the property and strengthen rent for the owner. It is an ‘equation’ of the property’s performance, and must be adhered to.

In these times when the performance of retail shopping and malls is under some pressure, it is essential that you do a property business plan once a year and incorporate into that plan key elements of activity and planning. Parts of that plan must include:

• Tenant mix analysis
• Tenant Merge Strategy
• standard leases
• anchor plugins
• Vacancy Management Plan
• vacancy marketing
• Income and expense analysis and benchmarks
• Customer profiles
• Sales records for retention segments
• Marketing strategies for the property.
• Owner Life Cycle Plans
• Tenant retention programs
• Capital Investments and Renovation Initiatives
• schedule maintenance
• Competitor analysis

So back to the point of looking at the mix of tenants. Here are some ideas to help you get started with just that.

1. What anchor tenants do you have in the property and how long do they have occupancy left? If your primary tenant is important to the property and the mix (that’s likely the case), you’ll need a renovation or replacement program to resolve any threat of vacancy.
2. Special tenants must be a good fit for the property and the buyer. Specialty tenant placement should occur in ‘groups’ that encourage sales and buyer attention. If a shopper buys products in one store, the adjacent stores should be complementary to potentially expand the sales potential of each shopper’s purchase.
3. Some of your tenants will be of type ‘target’. That means you’ll see people visit that store regardless of their location. A post office is a good example. In a shopping center, it’s good to have a few of these target tenants and distribute them in locations where they benefit the overall mix of tenants.
4. Look at the ‘permitted use’ as detailed in each of the tenants’ leases. For example, and when it comes to food courts, it is important to ensure that the ‘permitted uses’ and ‘exclusivities’ noted in each lease are respected. One of the most common problems in a food court is the sale and provision of ‘coffee’. If you have a major coffee shop retailer in the mall, you could be destroying your business by allowing all other retailers to sell coffee. That’s where a ‘permitted use’ strategy comes in handy.

Taking all these aspects into account, you can plan the tenant mix and tenant profile in the property. A successful commercial property is all about strategy and planning. If you manage or lease a mall, it’s your job to recognize that fact and implement the plan.