Revitalizing Neighborhood Shopping Centers Part Iby: Confilabs
These days the view many property owners see when they look around their shopping centers is an increase in vacancies. This is especially the case with small retail centers that rely heavily on the strength of their tenants and the surrounding community. Yet despite what would seem a bleak economic outlook, all is not lost for small retail shopping centers. In fact, there are plenty of service-oriented users and restaurants who still need space. But commercial property owners and landlords have to be creative, focused and flexible, providing convenience and service with a good location to be successful long term. The following strategies have proven effective when it comes to revitalizing neighborhood shopping centers.
One of the keys to securing new leases in the current economic environment is flexibility especially when localized factors vary among small retail centers. Landlords are finding that tenants in one center are motivated by free rent while another tenant prefers tenant improvement dollars and another seeks early occupancy. Wise landlords and property owners recognize there are certain situations where time is on the tenant’s side. By offering early occupancy, taking possession 30 to 90 days prior to lease commencement, in lieu of free rent tenants are more financially equipped to build out new space or rehab the existing space.
Offering tenant improvement allowances can also help tenants secure a lease. Depending on whether the tenant plans to rehab or a new build-out, property owners may offer tenant improvement allowances from $10 to $30 per square foot. Other cash-strapped property owners who don’t have the luxury of granting tenant improvement allowances are opting to secure rent abatement periods equal to “market” tenant improvement amounts instead.
Another strategy landlords are using to secure tenants is offering shorter lease terms, free rent or graduated rent structures. These days many landlords are offering free rent over tenant improvement money. Another way to meet the needs of both the tenant and landlord is to offer 50 percent rent for a six to 12 month time period. Offering a period of six to 12 months of 50 percent rent is another way to meet the needs of both landlords and tenants. Other landlords spread out the rent-free months, offering additional free rent if the tenants take it in months 12, 24, 36 and 48 rather than the first 60 days of the lease.
But experienced property owners caution landlords going to extreme lengths to lease up vacant spaces. It’s important to evaluate the credit and financial stability of a tenant with a thorough understanding of their operating history and experience before negotiating to get them into your shopping center.
It’s especially difficult to ink a lease when a shopping center is in a poor location or has low traffic counts. Marketing such properties takes tremendous creativity with many landlords creating co-tenancy arrangements to infuse new energy while improving the tenant mix in their shopping centers. By bringing sub shops with heavy traffic at lunch together with fitness centers that are busy after normal work hours with yogurt shops doing most of their business between 2 p.m. and 5 p.m., traffic flow can dramatically increase. Restaurant tenants create revolving traffic that can benefit service businesses like convenience stores, hair and nail salons and medical-related services.
And remember old-fashioned techniques still have value even in the information age. One way to gain attention at small shopping centers is with window posters, banners and marketing brochure boxes on property exteriors. Enhanced signs, landscaping, clean windows and litter-free property make good impressions too especially since new tenants frequently talk to existing tenants to see how happy they are with their location and space.
In Part II we will address targeting new service oriented tenants and social media outreach.