Retail investment property is a class of investment that needs more frequent refurbishment and renovation than office property, simply because of the intensity of customer use and the required levels of property presentation to encourage sales and return patronage.
If the customer to the retail property does not get a great experience when they shop there, then they will not come back again. It’s that simple. This problem soon reflects itself in lower levels of sales for the tenants and then rental arrears for the landlord. Vacancies then start and become harder to lease as the local business community considers the property a ‘lemon’. The problem can then get out of control and the property is in decline.
A great retail property experience includes:
- Ease of parking and access at any time
- Security across the premises at all hours
- Good exterior lighting
- Signage that is standardised, clean, well lit, and easily seen
- A variety of tenants in the tenant mix that match customer needs
- Services and amenities that are clean and easy to find
- Common area zones for customer rest and gathering
- Tenants that are welcoming and encourage customers back to the property
- A broader selection of tenants that are both convenience and destination retailers
Remember that tenants do talk to each other, and that any new tenants that are considering a move to a shopping mall or shopping centre, will likely ask the existing tenants about their experiences with the landlord and the customers. Retail properties that encourage business for the tenants and customers to the property are the best performing properties.
If you are considering owning a retail property, do so only on the basis that you are prepared for the intensity of property management costs and controls. Be prepared to spend money on the building presentation and keep it up to the levels of expectation. The returns that you get back from the property will be more generous and stable.
The best retail properties look good and function well. They also return much higher levels of rental than office or industrial property; however the risks are greater when the retail property is not maintained.
Retail properties do require truly professional property management processes provided by experienced landlords or specialist property agents that understand the property type and its integration to the customer. When you get this equation correct, then you are on the right track to improved property performance.
