Chapter 15
Managing Retail Property

Historical Perspective

l    Urban decentralization altered trend of CBD

    Reliance on private transportation

    Chain stores

    Electronic power distribution allowed growth

    Widespread use of consumer credit

    Developed highway systems

    Trade inception

    Supermarket

l    Modern shopping center

    Strip developments

    After World War I, comprehensive projects

Property Analysis
Shopping Center Classifications

Neighborhood center

l   Serves 2,500 to 40,000 shoppers

l   Typically strip form

l   Convenience shopping

Community center

l   Apparel and home furnishings or department store

l   Serves 40,000 to 150,000 shoppers

l   100,000 to 250,000 square feet

Regional center

l   Broad selection of merchandise

l   Serves large residential sector

l   300,000 to 1,000,000 square feet

l   Over 750,000 square feet-super-regional center

Remora Center

l   Built on an out-parcel or nearby parcel to regional center

l   Typically strip design

Specialty center

l   Specialty merchandise

l   Caters to upper-income discretionary spending

l   Small but attracts from wide area

Evaluation of facilities

l   Gross leasable area (GLA)

l   Gross floor area includes common area

l   Parking facilities

   Parking index for shopping center is 5.5

   Cross-parking easements for out-parcels

Other Evaluation Factors

l    Parking facilities well maintained and marked

l    Safe and easy ingress and egress

l    Location analysis

    Traffic qualified in volume and attitude

    Traditional location in established retail district

    Early shopping centers used two major department stores as anchor units

    Mall-type regionals use up to five anchor establishments with greater variety

    Primary and secondary goods

Trading Area Analysis

l    Locate all competition on map

    Note parking and probable volume

    Define traffic areas

    Outline trading area

l    Estimate number of consumers in area

    Analyze census data

l    Measure income level in area

    Total available dollars

    Expendable income by retail categories

Market Analysis

l   No standard unit of retail space

   Over 1,934,500 retail establishments ranging from mom and-pop to Wal-Mart

   Average retailer employs only nine people

l   Measure occupancy of store spaces via survey

l   General trends in retail business via business statistics

Marketing Retail Space

l    Mostly done by developer to obtain financing

l    Anchor tenants have two criteria

    Developer must have successful background

    Location must meet four standards

l   High traffic concentration

l   Sufficient population density

l   Sufficient purchasing power

l   Growth potential

    No serious competition

Advertising

l   Billboards and "for rent" signs most effective

l   Distribute brochures

   Inquiring prospects

   Direct mail

   Trade journals

Shopping Center Tenancy
Tenant Mix

l   Best key tenant depends upon type of shopping center

   Neighborhood center--supermarket

   Community center--variety stores, junior department stores, discount stores--K-mart

   Regional center--major department store--Sears, Lord & Taylor

Tenant Mix (Continued)

l   Supplementary retail tenants

   Neighborhood center-convenience stores

   Community center-variety

l   In existing facility, may restructure mix as leases expire or are defaulted

Other Tenant Mix Factors

l    Retailer's history of success

l    Compatibility

    With other tenants

    Center design

    Consumer market

l    Estimated drawing power of tenant

l    Its merchandising and advertising policy

l    Parking facilities needed

l    Tenant's housekeeping ability and special maintenance requirements

Tenant Placement

l   Maximum interaction via placing key tenants so that shoppers must pass smaller establishments

l   Parking requirements of a business (grocery)

l   Cluster complementary retail operations

Rental Rates

l   Space rental based on costs

l   Fixed-dollar rental

   Used when tenant has poor records or possibility of fraud

   Amount based on three factors

l  Comparable store rentals

l  Adjustments for traffic-producing adjacent stores

l  Adjustments for trends in economy

Franchise Rentals

l   Based on value of established consumer traffic

l   Most Pay this higher rental for consumer volume

l   Two factors must be considered before accepting percentage rent

   Business must attain highest volume under most favorable percentage terms

   Particular retailer must obtain maximum sales volume

Franchise Rentals (Continued)

l   Factors affecting actual percentage of gross income

   Business volume

   Profit margin

   Inventory turnover

l   Sometimes percentage of net revenue in lieu of gross income

Lease Document

l   Provisions for rent collection

l   Term of lease

   May be 20 years for anchor tenant

Clauses that apply specifically to shopping centers

l   Use clause restricts use of space

l   Radius clause restricts tenant from operating another outlet within certain area of center

l   Escalation clause

l   Common area maintenance clause charges tenant for portion of costs to maintain common area

l   Tenant improvements must be made by approved contractor

Lease Clauses (Continued)

l   Merchants' association clause provides mandatory membership and prescribes tenant's contribution

l   Sign restriction clause to create unified image

Tenant Relations

l   Merchants' associations

   Plan advertising

   Stage promotional events

   Strive to widen and intensify center's trading area

l   Store hours

Maintenance and Security

l    Manager is responsible for common area

    Maintaining, cleaning, and servicing public areas and parking lots

    Interior and exterior landscaping

    Lighting

    Security

l    Complexity depends on several factors

    Center's size

    Geographic location

    Type of leases in effect

Centers being regarded more by public as public property

l   Certain groups may cause security problems

   Social and labor demonstrators

   Political candidates

   Charitable solicitors

l   Establishment of policies

   Loud-speakers

   Harassment of shoppers

   General conduct offensive to public