Comparing Rents in Your Strip Mall Tenancy Mix
When you select new tenants for your retail strip mall, you should do so on the basis of the right tenant for the right location, paying the right rent. Not all tenants can pay the same rent simply because they are located in the same property. The tenancy mix has to be a balance of tenants that complement each other and draw in the customers. The rent that they pay is secondary to the tenant that you choose.
A retail shop business has its own margins of profitability based on the product or service it provides. This means that the shop rent will and should change based on the retailer type, not the location of the tenancy.
Broadly speaking the comparable rents from other tenants will give you a place to start from when setting new rents, however the tenant’s ability to pay the rent is fundamental to the equation. For example there is much more profit margin in a fast food retailers business versus that of a newsagent. The fast food retailer can spend more money on rent in a strip mall property.
You cannot however fill a property with fast food tenants simply to keep the rent up. The tenant mix offering will not well service the customer. What you need in the ideal tenant mix is a mixture of convenience retail, fast food, specialist retail, destination retail, and an anchor tenant or two.
Design your property so that the tenants are clustered into zones that sell off each other. This has been found to be highly successful as a tenant mix strategy; if you put complementary retailers into the same cluster, more sales result across the board. When you get more sales, you underpin the landlords rent, lower the potential for vacancies, and help the property perform more directly.
A well designed tenancy mix will create an ‘ant track’ where people and customers walk. It is the ‘ant track’ that will elevate your rental on the corners and the areas of congregation.
If you compare properties locally you can see what works and what doesn’t. The way to analyse the tenant mix and rentals of other properties is to look at:
- The location of the shop relative to the ‘ant track’
- The size of the shop
- The frontage of the shop
- Proximity of the shop in a ‘cluster’ that works
- The number of people visiting the other property and the best days for shoppers
- The length of the lease term
- The type of rent (net or gross) that is paid and when it was set
It is surprising what other tenants in other properties will tell you if you just ask. You will likely find out about levels of trade, the other landlord, and the customer mindset that the retailers see. All of this is of high value when you are setting your plans for your own retail strip mall property.