Strategic Leasing

One of the main differences between traditional town centres and enclosed shopping centres is the ownership. Enclosed shopping centres usually have a single owner to make decisions; traditional town centres see a large variety of owners with varying footprints and views.

Customers, owners, traders and the manager are the main stakeholders for shopping centres. Each of the stakeholders has different views and requirements for each type of centre. For instance, where in enclosed centres the outgoings and rent are much higher than in the traditional centres, this is offset by the higher traffic flow. Therefore there is usually a different kind of trader with different requirements in the enclosed centres.

Lower pedestrian counts and an increase of services and other non-retail businesses in prime locations are telltale signs of decline. This can lead to an increased vacancy rate and a general despondency among traders. This then gives a negative impression to the customers and a vicious circle has started.

There are 3 main ingredients to make a great town centre:

• Presentation
• Branding and Marketing
• Retail Mix

Councils, traders, town centre management and business owners each have a different role to play to make it work. In the retail mix, there is a fifth stakeholder, namely the leasing agents. Successful presentation, branding and marketing are complex and specialist areas. These are discussed extensively in many other publications and presentations.

The key to creating a successful retail mix is Strategic Leasing. Strategic leasing usually requires a medium to long term time frame as most leases are signed for 3-5 years. Strategic leasing consists of the following:

• Customer Research
• Business Audit
• Competition Analysis
• Tenant Evaluation

Customer Research focuses on preferences of residents and traders, visitation habits and the data available from many sources.

The Business Audit identifies each business, its relative market position, clusters, anchors and the environment. The results form the basis for the marketing of the centre. If the marketing and branding are inconsistent with what is really there, customers will be disappointed.

The Competition Analysis is aimed at finding your competitions strengths and weaknesses: these are areas of opportunity.

Tenant Evaluation is important to the long term success of the lease for both the owner and the tenant. Not every tenant that fits the retail mix will be suitable: can they afford the rent, do they plan to stay for a while and will they keep the property in good order? Some of this can be assessed by checking the tenant’s business plan, his rationale for choosing the location, his awareness of the demographics and his long term view.

Business owners and leasing agents need to be encouraged to look long term at their investment as well as the shopping centre's success. Past experience has shown that owners and leasing agents only look short term. Landlords should be made to feel comfortable about waiting for the right tenant. Better insight is required into the success of prospective tenants and hence in the value of the property and its return.

Written by: Ray Jacobs, Director, YMP Consulting, Greensborough VIC