Our guide to attracting retail tenants

We're told that retail faces an apocalypse thanks to digital distribution; however, it’s still a profitable form of property investment – provided you find the right tenants, i.e., those that will continue to thrive in the current business environment.

Location is important as well, of course. Retail investors need to know the kind of clientele they're likely to attract in an area, so they can target the tenants that provide the appropriate services. A report by location planning consultants Caci found Milton Keynes, Croydon, Crawley and Lancaster to be particularly strong areas for retail property investment, and their findings also point towards an upsurge in popularity for shopping centres located in regional areas.

Regardless of location, your priority should always be attracting – and keeping – the right tenants. The success of your retail property ultimately depends on having a strong selection of vendors that cater to each other's needs, as well as those of their customers.

Finding the right tenants depends on store type

Anchor stores: The first thing you need to do is establish an “anchor” store – which will be primarily responsible for attracting consumers to your retail space. The idea is that they come for the anchor, but are encouraged to spend some time at the other stores along the way. According to the International Council of Shopping Centers, the anchor usually accounts for 50-70% of the leasable space in regional shopping centres, and retail properties with at least one anchor store consistently outperform those without one.

Retail investors used to have more options available to them when it came to picking an anchor store, but nowadays most prefer to go with the tried and tested approach of having a supermarket as their anchor. People need to eat, regardless of economic climate and location, so a supermarket presents a reliable means of attracting consumers, and therefore tenants. Other options include a gym, an entertainment venue such as an ice skating rink or cinema, or even a residential space as your anchor.

The specialised vendors: Once you've picked your anchor stores, it's easier to determine what vendors will be suitable for your retail property. The type of speciality vendors you choose is very important. For example, a jewellery shop may average only five customers a day while an internet café might bring in 100 people a day; but the jewellers makes a far greater profit off those five customers than the internet cafe, and will (in theory) be a more reliable source of rental income.

Attracting tenants

There are a number of methods you can use to attract tenants to your retail property. They include:

• Targeting tenants at competing shopping centres: While it may be too aggressive a tactic for some, the method has become increasingly popular, according to Imperial Properties. The danger is that other retail investors are also eyeing your vendors.

• Form a business relationship with your tenants: Encouraging your tenants to open additional branches at other shopping centres can actually convince them to stay with you. Tenants who feel that you are invested in their business are more likely to renew their tenancies when the time comes.

• Ensure that the turning points and entrance areas of your retail property are reserved for smaller tenants. These are the areas that are most like to feature heavy traffic of customers, and highly specialised vendors will benefit from the visibility.

• Try to position tenants in close proximity to complementary stores and services, such as a food court.

• Make use of the digital landscape: Social media, online listings (like SpaceList and LoopNet), and websites (like eBay) provide powerful new ways to advertise retail spaces. They say digital is the doom of retail, but there are many ways in which the two can work together for mutual benefit.

• Stage open house events to show off the property to potential vendors.

Retail, just like any form of property investment, stands the best chance of success if you do your research and know your audience. This is all the more essential when your success depends on having a diverse selection of tenants that cater to different needs, while at the same time complementing each other's services. Before taking such a big step, however, always get professional investment advice from retail property experts.

Alternatively, you could give residential property investment a try. It’s a good stepping stone to retail investment, as it involves moderately less risk, especially if you start out small.

Disclaimer: The information and data provided are for general information purposes. They do not constitute investment advice nor can they take account of your own particular circumstances. If you require any advice on investments, you should contact a financial or other professional adviser.

Featured image "Public spaces, markets" via La Citta Vita

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