Much has been said about the Amazon effect and how it is going to be the end of the shopping center. People can sit at their computer and purchase almost everything without leaving their home. To that end, we have seen decay in the investment viability of shopping centers. Centers have proliferated with personal care, drycleaners, nail salons, etc. and away from soft goods and big box retailers.
However, opportunity does exist in strip centers that have moved to tenant service and food providers. Insurance agencies, financial services, and traditional office users that wish to establish a higher profile with good signage and drive-by recognition are gravitating to these centers. Design of the space is important and a driving force behind their success.
Single story with prominent signage is most desirable. Depth of space should not exceed 75 feet. For example, a 1,500 square foot tenant would have a 20’ front with a 75’ depth. Even better is a 65 foot depth, which would yield a 1,300 square foot space. This reduces the cost to the tenant by 13.3% per year. If we attach a $15 per square foot rental rate, the tenant will reduce its cost by $3,000 per year. A substantial advantage when you seek to market space.
Good property management can make or break a center. Make sure you interview several management companies for management and leasing services. Once you select one, let them assist in evaluating the due diligence. Set up a repair and alteration list and properly fund it so you can hit the ground running once you close on the property. Make the manager accountable by outlining in the management agreement what you expect and what documentation will be forthcoming to verify they are doing the job properly.
Determine you target market. Set up a detailed plan with your leasing broker. Have the broker keep a log of how many showings, number of mailings and email blasts to potential tenants, and review comments and adjust your plan to the market. You will need to fund for tenant improvements, free rent, and leasing commissions. Make sure you budget for these items.
VISIT THE SITE
You need to personally visit the site and make sure it is running properly. Touch base with you tenants and let them know you appreciate them. Listen to their concerns and make sure their concerns are answered even if the answer is NO!!. Basic respect for your tenants is key to a lasting relationship. It is easier to keep a tenant than to find a new one.