When looking at a retail property for the first time as a property manager or leasing manager, you have to ask the right questions and be prepared for a complex property inspection process. A retail property, be it a shopping mall, shopping centre, strip mall, or a stand-alone single shop, has critical issues to be observed when inspecting it for future property management.
The reason for this property criticality is that retail property is a vibrant living cash flow that is highly geared to successful function of the property, the tenancy mix, and the sentiment of the customer. When all three of these things are supported and functioning well, then the landlord has a great investment.
So let’s say you are about to inspect a retail property for the purposes of providing potential property management services. Here are some critical questions to ask of the property owner in the inspection process.
How long has the property been held by the owner and why did they purchase it?
How long does the property owner want to hold the property into the future and why?
What vacancy threats exist in the property now and how are they being handled?
What are the levels of existing trade in the property and how has that changed over the last two years?
What or who are the best tenants and why is that?
What or who are the more difficult tenants and why is that?
What are the existing rent levels and how do they compare to the market?
Permitted premises use for the tenant types in their current location.
What are the best days of trade and why is that?
Get a copy of the standard lease that is used with any new leases in the property so that it can be understood. What you should look at are important things such as rent reviews, options, expires, make good, rent guarantees, arrears, and lease defaults.
What signage, common areas, and surrounds need attention to give the customer a better feel about the property?
What are the levels of outgoings in the property and how does that compare to similar properties in the area?
If you could change the tenant mix today, how would that be done?
What leases are coming up for expiry in the next 2 years, and what is the existing strategy for that?
Of those leases, what tenants have options for a further term and when will they be required to exercise them?
What critical levels of maintenance are outstanding in the property and must be attended to now?
Get a copy of the existing property budget of income and expenditure for the current year, and then also the audited outcomes for the last 2 years. Compare them to the current benchmark levels for a property of its type today. You want to know if your current property is in parity to the competition properties of similar types.
Are there any relocation issues or refurbishment needs on the horizon and how are they to be handled?
Look at the property with the eye of a customer that wants to buy something. How would they feel as they enter and then access the property?
To help with this process it also pays to talk to the tenants yourself so you can see exactly how they feel about the property today. Add to that some customer conversations and interviews, and then you really know what is going on.
So this list can go on and should do so based on the property type and its complexity. This basic list will however give you an immediate feel for what is currently going on around the retail investment property and the most immediate challenges that the property faces. Then you can decide if you really want to manage it.
