Shopping Center Management – How to Keep Tenants Longer, More Profitably
Never has there been a more important time to retain your shopping center tenants than right now. Losing a major tenant is damaging in the best of times; losing a major tenant in a recession could be disastrous.
From our years of experience in managing shopping centers of all sizes all over the nation, we’ve come up with some general guidelines for tenant retention that you may find useful as you manage your properties.
Guideline #1: Vet Your Prospective Tenants More Carefully Than EverWith qualified tenants getting more and more rare these days, you may be tempted to relax your vetting procedures a bit just to fill the available space. Our advice: DON’T DO THAT! The old adage still holds that if a prospect looks shaky early on he’ll look even worse under contract . The only difference perhaps is most owners can less afford a bad tenant today than previously. There are more barriers to success in this present economy, so don’t take on unnecessary risk just to fill a lease.
Instead, look into your prospect’s references and financial statement more closely than ever before. Down the road, you’ll be glad you did. There are proven vetting procedures (which we implement on behalf of all of our clients) that will give you a realistic, no-holds-barred assessment of the prospect, greatly enhancing the likelihood that he will either be turned be with you for many years into the future and keep your turn-over to a minimum.
Guideline #2: Understand What Tenants Are Thinking
When vacancies start piling up, it’s quite likely someone hasn’t been in the facility communicating with the tenants. A vacancy should never be a surprise, and in many cases, it can even be avoided.
In shopping center after center, we verified again and again that there’s just no substitute for getting out and interfacing directly with your tenants. You (or better yet, your qualified property managers) have to get out and invest significant face time with tenants, talking, listening, probing, analyzing. That’s the only way to understand where tenants stand in terms of their happiness, their stability, and the future of their relationship with you.
Ask carefully crafted questions to get to the core of existing problems. Determine what they like or dislike about the facility, the management, and the owners. Find out if there are maintenance issues, concerns about traffic, problems with neighboring tenants, parking or street traffic issues, or just about anything your tenants may be worrying about.
Guideline #3: Be a Pro-Active Landlord
Don’t sit around assuming everything is going well with your tenants. Insist that your property managers are out on contact tours regularly. In a typical neighborhood shopping center, the tenants are more often than not mom and pop businesses. And again typically, their leases extend from 3 to 5 years. That’s a relatively long time, and financial situations can change, even for your most stable tenants.
Make it the job of your property manager to find out what these changes might be, and whether they will impact either retention or lease abandonment rates. Remember that when your spaces stand empty, your ability to meet your own financial commitments go down. We train our property managers to stay on top of tenant financial stability so you won’t get caught empty-handed down the road. That calls for a completely pro-active management attitude. Your manager has to be involved, constantly available, and 100% on top of what’s happening at all times.
Guideline #4: Analyze everything.
It’s not enough that a good property manager gets out there and interfaces with tenants and vendors on a regular basis. He has to be a skilled and conscientious analyst, as well.
A good place for the analyses to begin is with the basics:
o Current rent roll
o Tenant roster
o Lease expiration date
o Tenants’ renewal options
o Next rent escalation
o Amount of current rent.
Next, analyze the stability of your shopping center as it relates to:
o Breaking up the space to gather more rent
o Condition of the property
o Evolving conditions/business climate of the areas surrounding the center
o Ability to redevelop and the feasibility of that option
o Facelift vs. Complete Redevelopment
o Ability to bring in new (and national) tenants
o Keeping the center current and up to market standards
o Lease renewal options to help owners protect their assets
With all of this data in hand, you can now realistically face your property’s true prospects for the future, keeping in mind the unforeseen events that can’t be analyzed from data. Bottom line: the more you know about your property, tenants, property managers and local economic conditions, the better prepared you will be to handle whatever comes down the road.