Retail Shopping Centres - Observations About Lease Renewals

Retail Shopping Centres

If you are a retail property manager or retail leasing manager you would know the high value benefit that can be obtained through careful negotiation of lease renewals in a shopping centre. The lease renewal is something you would consider carefully. You have to know what the property is doing and where it is headed. The lease renewal should be looked at in balance to the overall property plans and targets.

Obviously the tenant is also quite focused on the retail lease renewal as it is make or break time for their business. They either get a lease renewal and the business continues, or they vacate and have to move the business elsewhere.

Good planning and communication by the property manager leading up to a retail lease renewal is essential to property stability and control. The retail property or leasing manager is the point of balance between the landlord's investment plans, the tenants business, the customers, and the property function.

So when a lease comes up for renewal negotiation there are a number of alternatives:

1. Do not renew and let a vacancy occur. It could be that another plan exists for the property or the local area.
2. Refurbish the premises as part of the discussion for a new lease. Retail property ages faster than office property, so it pays to have an ongoing refurbishment plan in motion.
3. Renovate the common areas adjacent to the tenancy. This helps integrate the property into the local community and optimise sales or visitation
4. Relocate the tenant to a better position in the tenant mix. Sometimes a relocation proposal is good for the tenant and for the property. As part of the relocation, the tenant could be offered enticements such as better rent incentives, larger premises, better premises, or better location.
5. Renew on consistent terms with the existing lease arrangements. If keeping the status quo is preferable in the lease negotiation then that is fine; you just need to relate that to the coming years that the lease will remain active.
6. Negotiate fresh occupancy terms that are in keeping with new plans for the tenancy or the property (or both).
7. Demolish the property and build something else. Changes to the local community may indicate that this is a better plan for the future.
8. Offer the tenant a proposal that involves them improving their offering or shop presentation.

So a lease renewal in a retail property or shopping centre is a great opportunity for change. It allows the landlord to help the tenant with their future plans, whilst optimising the property future. Every lease renewal should be looked at across the entire property balance, not individually. Use the lease renewal to improve the tenant mix and offering to the community. The tenants and the landlord both see ultimate benefit.