FSP Retail Blog

Economic turmoil historically gives rise to costs and benefits. The costs tend to be more visible, immediate and to attract the principal attention. The benefits, more subtle and apparent only in the longer term, attract less comment.

Recently, a lot has been heard of the substantial losses of capital and jobs resulting from the financial crisis. Without minimising the significance of these costs, the purpose here is to consider one of the benefits that can already be discerned and is already being exploited by some of the more sophisticated portfolios.

Since 2008, landlords have almost universally become more involved with their tenants. Their understanding of the economics and financing of retail operations has risen significantly - the consequence of negotiations with retailers unwilling or unable to pay the existing or proposed rent. The result has been an increase of shorter leases, many on performance related rents.

Landlords generally believe the benefits have accrued entirely to retailers, with nothing for themselves. A different perspective is that landlords now have opportunities to use their new knowledge of retailing. For example, turnover information has many applications to assist better management of the portfolio. It can be used to benchmark performance and to improve centre marketing and management. It enables the landlord to identify additional opportunities for the retailer elsewhere in the portfolio and indeed to work more closely with the retailer to improve performance and profitability. In a competitive market place, each shopping location needs to establish its competitive advantage; to stand out from its rivals by better meeting the needs of the ultimate customer, the shopper. Thorough understanding of the retailer’s shopper profile enables the creation of a better fit between tenant mix and shopper profile.

In the midst of a challenging trading environment, it is often difficult to believe that the market will eventually change – but it will. When better times return, the detailed understanding of retailer performance may seem less relevant. The truth is that this knowledge will provide you with the necessary differential advantage, making your centre distinctive and better fitted to shopper requirements.

Exploiting these new insights requires skills and ways of working that may be non-traditional and unfamiliar to landlords. However, a number of FSP clients have improved both the amount and security of their rental income through using the information newly available to them. The return on their investment is showing a handsome return. Why not get FSP to show you how you can benefit too?