Strategies for Success: 3 Tactics for Working with Small Tenants

FEATURE

Strategies for Success: 3 Tactics for Working with Small Tenants

Maryam just knew her idea to open a children’s bookstore in her local mall was a winner. She had never opened a store before, but it was her hobby and she knew lots of families were moving into the area. She figured it would be easy to gain potential customers. Due to the pandemic, several spaces in the mall had been vacant for almost a year and Maryam was willing to take a space with limited visibility. Daniel, the landlord, liked Maryam; she was very enthusiastic. After all, one of his best retailers had convinced him the idea would be a sure-fire hit.

Fast forward to Maryam’s opening day: When Daniel visited Maryam’s store, he realized she had tried to save money by postponing fixture delivery. Merchandising seemed scattered and her exterior sign wasn’t up. She met him at the door to ask for a deferral on her first month’s rent.

What was the problem?

When times are tough, it can seem like filling a vacancy with any retailer means progress. Although it’s tempting to take the immediate solution, leasing to small tenants (under 10,000 SF) often fail due to these common challenges: inadequate finances, no business plan, faulty customer service and limited marketing strategies. Often, this means these tenants move out almost as soon as they move in.

While owners and managers cannot guarantee every retailer will succeed, they can increase the likelihood of success with 3 key tactics:

Shannon Alter, CPM

Owner Leaders Exceed

Sometimes when there has been a lull in the market, we just want to put a tenant in the space. As a result, the caution we exercise in lease ”negotiations is thrown to the wind.

Choose the right retailers for your center, period.

Sometimes when there has been a lull in the market, we just want to put a tenant in the space. As a result, the caution we exercise in lease negotiations is thrown to the wind. Perhaps, like Daniel, we’re anxious to get a deal done and fill our vacancies - we choose an inexperienced tenant like Maryam, even though her concept may not add value to our centre’s existing mix. For instance, your location is not ideal for a particular type of business, it’s your job to choose tenants who are the best fit for your property and who are most likely to do well.

Evaluate your tenants

Does your prospective tenant have an actual business plan? If not, send them back to the drawing board.

Don’t underestimate the importance of understanding not only how your new retailer’s store will be financed, but what it will take to operate it. Novice tenants may not realize that it may take time for them to show a profit and they may be ill-equipped to cover operations for the long term.

Juby Jose, Head of Marketing & Specialty Leasing for Dalma Mall in Abu Dhabi, notes: “Smaller retailers often don’t carry what’s known as a ‘sinking fund.’ If they don’t have a cushion, a reserve fund to help them absorb losses during the crisis period, they can fail.”

He adds: “It’s important for the landlord to quickly determine the point of no return for a tenant and then decide if and how they can further support them. For example, during the pandemic, we offered selected rent deferrals with a repayment plan.” Have you ever walked into a store that seems to have a little bit of everything yet not enough of anything? Neophyte tenants with less business savvy often mistakenly think marketing is an unnecessary expense. Ultimately, this is ineffective merchandising and it can have a huge effect on the success of a retailer’s business. Because marketing isn’t everyone’s expertise, a landlord’s help can be instrumental.

Juby Jose suggests first to evaluate exactly what type of marketing assistance a tenant really needs. “In our case, our mall’s customer base is 65% Emirati, it’s essential for us to be relevant in the market. For example, we will include a start-up tenant in our incubation strategy program, as a way to test their concept and see if it works. Then, we will follow it with a story on Instagram or TikTok to further enhance the marketing message. In the UAE, it’s hot outside 8 months of the year, people are indoors most of the time. This means that the mall is their favorite habitat and the marketing has to be efficient,” he added.

In today’s retail climate, it’s crucial to choose tenants who are likely to enhance your shopping centre, delight their customers and help you create value. Managers and owners who are able to refocus and follow these key strategies will be able to create successful shopping centres for the future.

Shannon Alter, CPM is a global leader, trainer and speaker who works with organizations that want to communicate with clarity.

For more information, visit www.leadersexceed.com or https://www.linkedin.com/in/shannonalter/