Retail Tenant Research Articles

Retail tenant mix effect on shopping mall’s performance

PurposeAchieving a balanced tenant mix is a long-standing discourse in the retailing and consumer marketing literature. From the perspective of marketing mix planning, the diversity of tenants is beneficial to the performance of shopping malls. This paper aims to use a revealed preference approach to study empirically the effect of retail tenant mix planning on the rents of shopping malls.Design/methodology/approachThis study adopts a cross-disciplinary approach to develop the Island-Species-Area-Energy model to study the shopping mall marketing and management framework. The empirical data are obtained from the 129 major shopping malls in the UK.FindingsThe results confirm that the retail tenant mix is positively associated with mall size and shopping district purchasing power, implying a tenant mix equilibrium. Any deviations from the tenant mix equilibrium will impose a negative impact on total retail rents. Further, five factors, i.e. tenant mix equilibrium, building quality, locational convenience, leasing strategy and anchorage, are found to be contributing factors to retail rents.Originality/valueThe findings contribute to the current body of marketing knowledge from two perspectives: first, tenant mix effects on retail rents are empirically analysed based on the biogeography theory, which shows a tenant mix equilibrium for retail marketing planning. Second, a five-factor model on shopping mall marketing and management mix framework is developed and tested for the performance of shopping malls.

How the Law Can Better Protect Small Business Owners Against Location Risk in the Brick-and-Mortar Retail Sector

This Article examines how the law can help reduce retail vacancy rates in volatile urban real estate markets. Two potential drivers of high vacancy rates along retail corridors in otherwise healthy real estate markets are identified: (1) location risk, and (2) positive feedback effects. The inclusion of a percentage rent provision in a commercial lease better allocates location risk, especially for small business owners, than fixed rent. In some cases, the formation of a joint venture between landlord and retail tenant may represent the optimal response to location risk. To address positive feedback effects in which each storefront vacancy increases the likelihood of an additional storefront vacancy, a case is made for limited, narrowly tailored government intervention. This Article considers other legislative responses to the problem of vacant retail storefronts, including vacant property taxes, commercial rent control, and zoning reclassification, and examines the advantages and disadvantages of each.

The afterlife clause; towards a strategy for improved adaptation in retail property

PurposeThe retail sector is one of the largest property concerns in the UK at 154million m2 and worth almost £300billion in capital value (IPF, 2015). Whilst it continues to be a growth sector, many retail developments and supermarkets which have been constructed in the UK since a major boom in the 1980s have seen interventions to replace envelope fabric, update their appearance and be re-configured to suit changing tenant requirements. Others will be demolished to make way for new developments. The paper aims to discuss these issues.Design/methodology/approachIf the cost of adaptations to meet the required outcome is too great, or other drivers are stronger, adaptation becomes conversion or renewal. This process may be more damaging to the environment in terms of energy use, emissions and material wastage but may enable better quality and performing buildings to replace older stock. These decisions will be managed by cost benefit analysis and return on investment (feasibility, viability, risk and market appetite). This paper seeks to understand if it is possible to extend retail building life by anticipating future needs in the retail sector by forecasting what happens after the building is no longer required by the initial user.FindingsThis research has attempted to capture the knowledge and experience of those responsible for advising the stakeholders that make the significant decisions in retail development. Whist the methods may have been less satisfactory in extracting data, it has shown that predicting adaptability is quite difficult for many reasons. A direction towards increasing long-term adaptability the development is summarised in a list of key deliverables.Research limitations/implicationsThis study has demonstrated a clear need to increase the consideration of defining design life as part of the performance information of a building or development, particularly in terms of whole life cost and asset value beyond the viable term of the end user and the value of the asset in terms of materials and resources (such as embodied CO2 emissions or sequestrated timber). Assessment of the design and evaluation process adopted when existing buildings are in the process of refurbishment is necessary to demonstrate this benefit.Practical implicationsThere remains a major contradiction in the design approach for retail development; the choice between bespoke design which extends the design life and flexible design which maximises the interchangeability of end user. Buildings or parts of buildings may function better for longer if they are purpose built for key operators, anchor retail tenant or leisure use such as a cinema. However, these spaces are more likely to be changed most radically during an intervention to meet alternative functions in the future.Social implicationsFor adaptability to be possible and demonstrable it needs to be clearly communicated at all project stages by definition of design life phases in the brief, specification, construction contract and facilities management documentation. Adaptability can be monitored in the longer term by land registration mapping, planning and building control functions in the local authority as these extend above and beyond the scope of each owner or user, however it would be advisable for facilities managers to adopt clear documentation regarding the performance parameters expected at first occupation and how modifications and interventions can be applied for flexibility and adaptability to changing requirements.Originality/valueThis review of current practice in UK retail development has demonstrated that although design teams are thinking about the future of developments, they are also driven to meet current requirement because the immediate future is more important than the extended future for generating retail turnover. They are not expected to document any evidence of adaptability considerations. Retailers are equally unable to speculate far enough into the future and depend on immediate annual sales results to remain economically sustainable. This impasse will ultimately prevent any change in the status quo, and legislative intervention may be necessary if society prefers to see buildings within the urban fabric last longer than the terms of a 15-year lease.

An investigation into the investment decision-making practices of South African institutional investors

PurposeThe South African listed property market has changed its legal basis from property loan stock companies and property unit trusts to adopt the more familiar international structure, real estate investment trusts. The main distinction is how shareholding is structured and investment returns are paid out to shareholders, which results in a different tax treatment. It is hoped that this change would attract more foreign investment, but it is questionable if this is sufficient to convince global investors who, amidst a seeming worsening of the stability in the political and economic environment, would probably need more insight into aspects such as investment decision making within these South African organisations. The paper aims to discuss these issues.Design/methodology/approachUsing a balanced scorecard (BSC) framework, this study investigates the relevance of investment decision-making frameworks in South Africa. A survey using a sample of institutional investors that are included in the South African Property Market Index was conducted.FindingsThe study found similarities in decision-making priorities of South African institutional investors to those of previous studies. With the focus on retail property, tenant mix and secondary to that, quality of the centre management team is found to be important for forecasting expected returns in a retail investment decision environment. Diversification strategies were found to have similar results to previous studies, leaning more towards geographic location than economic location. Further, the study suggested the use of a BSC framework, linking the financial information and different financial ratios to nonfinancial aspects that need specific consideration in a retail investment environment.Research limitations/implicationsRetail property is considered to be of particular concern due to the business enterprise value that could be created if superior management techniques are applied. The investment decision stage concerned with forecasting expected returns relies on financial and quantitative models such as those derived from Modern Portfolio Theory. In a shopping mall environment, however, future performance is driven by nonfinancial factors, for example, tenant mix and superior customer experience. Therefore, forecasting expected returns in a retail environment requires a nuanced approach relative to other commercial property sectors.Originality/valueThe paper is considered to be original in its analysis of the retail real estate market in South Africa. This offers new insight into retail properties specifically, but also how investors in South Africa react to decision-making practices. This adds value in the internationalisation of the property market and the consistency and transparent practices applied globally.

DISTANCE FUNCTION AND FUZZY GOAL PROGRAMMING MODELS FOR EFFECTIVE SHOPPING MALL MANAGEMENT

In today's competitive environment, managing shopping malls is a challenging task. Electricity consumption directly impacts greenhouse gas emissions and recurring costs, while effective utilisation of leasable areas influences the profitability of malls. Retail tenant mix may play a vital role in the success of shopping malls by attracting more shoppers. In this paper, we present distance function and fuzzy goal programming (FGP) models for an effective shopping mall management. A solution procedure for finding the optimal tenant mix was presented. The three objectives of the model formulation were the maximising of the total leasable area, the minimising of the total electricity consumption and the maximising of the total number of shops. A distance function method was suggested to solve the obtained nonlinear integer programming problem. The problem was also solved using three FGP models. The superiority of the distance function approach over the FGP models was evidenced in the case example of the shopping mall located in Kolkata, India.

Percentage Rents and Stand-Alone Property: Share Contracting as a Barrier to Entry

Share (percentage rent) lease contracts have not been explained in the case of stand-alone property. To do so we develop a model of a local trade area with an incumbent retail tenant that makes non-contractable specific investment at the time of initial contracting and a monopolist landlord that controls the timing of follow-on entry. We show that a two-part share contract is optimal, in which a positive fraction of sales revenues is passed from the retail tenant to the landlord. The standard percentage rent contract is, however, dominated by an enhanced contract that includes a lump-sum payment made by the landlord to the incumbent tenant at the time of competitive entry. The welfaremaximizing contract is also analyzed and policy implications are discussed.

Gender differences of shoppers in the marketing and management of retail agglomerations

This paper aims to first identify gender differences in perception and evaluation of retail agglomerations, and second, discuss the implications of these differences for marketing and management. Based on a conceptual model 2151 agglomeration shoppers were surveyed using interviewer-administered questionnaires. Structural equation modelling revealed that accessibility, parking and infrastructure are perceived differently between gender groups. The attractiveness in terms of satisfaction, retention proneness and patronage intention was also evaluated distinctively. Nevertheless, when examining the impact of the perceived attributes on agglomeration attractiveness, there was no difference. In both settings, the retail tenant mix and the atmosphere are the main antecedents of attractiveness. Finally, an importance–performance analysis offers managers a method for prioritising their marketing efforts considering gender differences.

Urban place marketing and retail agglomeration customers

Through identifying the attributes of a place that have an influence on the patronage behaviour of urban retail customers, this paper presents a conceptual model that proposes direct and indirect antecedents regarding the different retail-related dimensions associated with urban place attractiveness. An empirical study was conducted whereby the model was tested by surveying approximately 500 actual customers at the time they visited a particular town centre for the purposes of shopping. The results showed that the retail tenant mix, the merchandise value, and the atmosphere had a direct impact, and the product range and the sales personnel an indirect impact upon the evaluation of attractiveness. Furthermore, a number of additional effects towards these antecedents were identified with respect to parking conditions, the non-retail tenant mix, manoeuvrability, and orientation. This revealed that retailing activities were a major driver of attractiveness for an urban place. The practical implication of these findings suggests that place marketing activities should be proactive in supporting and enabling retailers in fulfilling their roles.

Investigation of the Effects of Stores’ Tenant Mix and Internal and External Environmental Conditions on Customer Satisfaction from Shopping Centers in Iran

The research aims to determine the attractiveness of factors of Iranian shopping malls from the shopper’s point of view. Researchers used a conceptual framework that proposes significant impact between store tenant mix, internal and external conditions from shopping centers, and different dimensions of attractiveness. Then they test the hypotheses using a survey of 385 consumers of two shopping centers of Iran, to identify shopping mall attractiveness. A structural equation model using a correlation matrix with maximum likelihood was estimated by LISREL 8.8. The results indicate that from the attractiveness factors, retail tenant mix and atmosphere were the most influential factors in shopping centers and retail tenant mix was strongly affected by product range and to some extent by merchandise value. Thus, management teams of shopping malls can increase their mall attractiveness by identifying optimal retail tenant mix and protect their establishments with appropriate atmosphere.

A Decision Support on Planning Retail Tenant Mix in Shopping Malls

Consumption and shopping patterns are subject to changes for a variety of product categories. Shopping malls are becoming new places that consumers visit where the shopping itself has changed meaning and focus. Retailers are now concerned to find ways of presenting themselves inside these modern buildings and adapt to rapidly changing consumer expectations. Shopping malls, on the other hand, should focus on planning the appropriate retail tenant mix that will contribute their image and attract more visitors and shoppers. Although tenant mix selection has been a concern for shopping mall managers, no best way or strategy is offered as solving this problem. In this study, a multicriteria decision making framework is developed to prioritize the factors related with planning retail tenant mix within shopping malls. Shopping mall managers and experts are interviewed in accordance with the iterative steps of the decision making process. First of all, the factors are identified by the respondents. Then they are requested to indicate the relationships among factors. Analytical Network Process (ANP) is selected to construct the framework because of the dependencies and feedback relationships among the factors. Finally, the relative strengths of direct influences of factor pairs with respect to the third affected factors are revealed based on the pairwise comparison questions. As a result, the priorities of the factors are computed. Retail store's creating variety in shopping mall with its product offer, satisfying the needs of the shopping mall's target consumers, sales revenue per square meter, awareness of the retail store brand, being an anchor store for the shopping mall are found as the important factors. The priorities of factors can give guidance to shopping mall management team as a rating tool. The total rating score of a candidate retailer can be computed as the weighted average of individual contributions of the store with respect to each factor where weights are the computed priorities. This score can be used as a resulting acceptance/rejection decision of including a retail store into tenant mix. The proposed framework can also be utilized for open-air centers and hybrid centers. The priorities of the factors found at the present study can be compared with those of further studies conducted in different countries and cultures.

Building retail tenant trust: neighbourhood versus regional shopping centres

PurposeTrust is the basis of business relationships. The purpose of this paper is to explore the antecedents of trust in the context of the relationship between shopping centre management and retail tenants, primarily from the retailer perspective, as a first test of trust in such business‐to‐business relationships. A contrast is made between neighbourhood and regional centres to determine if centre size affects trust development.Design/methodology/approachQuantitative research methods are used. The focus is a sample of 201 retail tenants in Australian shopping centres. Psychometric properties were assessed for all multi‐item scales used to capture variables of interest. Multiple regression analysis is used to explain trust in terms of five key influences: power of the centre manager (as a negative relationship), empowerment of the retailer, flexibility, responsiveness and the shopping centre brand.FindingsEmpowerment, restraint of power and responsiveness are the main determinants of trust. Power is especially critical in regional shopping centres. The shopping centre brand and flexibility play important support roles in neighbourhood centres.Research limitations/implicationsThe lack of comparable studies limits the generalizability of the results to other countries.Practical implicationsCentre managers, in larger planned shopping centres, who want greater retail tenant trust, should not demonstrate their power overtly in, say, rent negotiations. They could also learn from small centres about being flexible and projecting a more unified centre brand.Originality/valueThis empirical study probes the antecedents of trust in Australian shopping centres, a previously neglected area in the shopping centre literature. The paper is unique because it contrasts neighbourhood and regional shopping centres.

Place marketing and urban retail agglomerations: An examination of shoppers’ place attractiveness perceptions

This article approaches the perceptions of shoppers towards urban retail agglomerations from the perspective of place marketing. Acknowledging that place marketers need to be mindful of how place users can be best fulfilled, this research conceptualises the agglomeration as a place marketing site. The literature reveals the role of place users, in particular the retail customers, in the place-formation process. As such, an evaluation framework proposes antecedents of (retail-related) place attractiveness in order to understand what the key drivers of this behaviour are. An empirical study is presented involving almost 500 face-to-face interviews of shoppers at the time they visit a town centre. The results show that the retail tenant mix and the atmosphere influence attractiveness most significantly. Critical reflection of the literature, with respect to the empirical findings, reveals the crucial necessity to understand and integrate the place user's point of view into the concept of place marketing. This research addresses a gap in the literature on place marketing, focusing on place users’ perceptions as opposed to the dominant theme of place actor's strategic needs.

Shopping streets versus shopping malls – determinants of agglomeration format attractiveness from the consumers' point of view

The decline of shopping streets and the rise of shopping malls have been major trends in European retailing for decades. So far, research has failed to investigate this shift of agglomeration format (AF) patronage from a marketing perspective, including the consumers' point of view. This paper presents a theoretical discussion of the generic similarities and conceptual differences between shopping streets and shopping malls. Subsequently, the AF-specific characteristics perceived by consumers are compared and discussed with respect to their impact on agglomeration attractiveness. This leads to the development of a conceptual framework which is empirically tested using a web-based survey of almost 1000 consumers representing a typical urban central European retail market. The relative importance of nine distinctive AF characteristics on attractiveness was analysed using structural equation modelling. The findings proved to be quite similar for both shopping streets and shopping malls; the retail tenant mix and atmosphere had the highest relative importance.

New age retail tenants: A new phenomenon

Over the past five years, there is a phenomenon of local shopping malls redefining their retail space to accommodate New Age Retail Tenants upon the exit of some Anchor Tenants who have been dominant for decades. Shopping centre managements are having an arduous task seeking replacement for these anchor tenants who, for a long time, have been perceived as backbones of shopping malls. In view of the above, this research seeks to investigate this new phenomenon through the shoppers' image of anchor tenants and new age retail tenants. The study found the image structures of the two tenant types differing. The research further tested for the impact of sociodemographic factors on consumers' preference of retail tenant type and among the sociodemographic factors, age showed the most significant impact. Further analysis broke down the age groups into two general age groups. The research findings indicated anchor tenants and new age tenants have different target group and thus possible to co-exist in a shopping mall. New age retail tenants have not evolved to replace anchor tenants. In fact, their entry to the local retail landscape have brought an alternative option for mall managers to rejuvenate the shopping centres of Singapore, as well as variety of shops to the shoppers.

AT LAST! Retail warehouse market round-up

This paper focuses on the retail warehouse and shopping park market and specifically on latest retailer activity and the current investment market. Retail warehousing is generally defined as ranging from bulky goods units to modern progressive shopping parks. As a sector, it outperformed all other property markets in the last 10 years with returns surpassing all other forms of retail property investment. The market is maturing in all aspects. Investors are becoming increasingly discerning and have heightened requirements in the fields of retail warehouse management, marketing, commercialisation, tenant and rental aspirations together with expectations and quality advice from specialist consultants. In turn, retailers are maturing with their requirements in the utilisation of space, flexibility of use and store design and signage taking, in some cases, hard earned lessons from the high street to the new arenas of out of town shopping.

Retail warehouse and shopping park development pipeline: Those who will occupy new space and the prevailing investment market

This paper focuses on the retail warehouse shopping park and leisure market, but specifically on the pipeline. Retail warehousing is generally defined as ranging from ‘bulky goods units’ to modern progressive shopping parks. As a sector it outperformed all other property markets in the last ten years, with returns surpassing all other forms of retail property investment. It is generally believed that the sector will be at the forefront of the wider retail market. 2004 was a strong year for this sector, and in the first half of 2005 confirmed transactions, together with deal speculation, suggest that this year will be no different.The market is maturing in all respects. Investors are becoming increasingly discerning and have heightened requirements in the fields of retail warehouse management, marketing, commercialisation, design, tenant and rental aspirations, expectations and quality advice from specialist consultants. Retailers are maturing in their requirements, with intensive utilisation of space, flexibility of use and store design and signage and in some cases taking hard-earned lessons from the high street to the new arenas of out-of-town shopping.The market has seen a steady increase of new retailers: traditionally the vanguard of a few who provide both the property market and the consumer with an ever-increasing range of retailers. Ironically, some of the earliest retailers which ventured out of town, such as the electrical retailers, have found that rentals have risen to such a level that they are being forced back into secondary locations. This creates opportunities for landlords to be creative asset managers.

Stand-Alone Centers Occupied by Big-Box Retailers

Investments in stand-alone centers occupied by big-box retailers do poorly as a hedge against changes in the variables that generally matter to institutional investors. The reason is structural. Big-box retailer leases often include a go-dark option allowing the retail tenant to vacate its space before expiration of the lease. This tends to occur under high inflation (and hence the big-box retailer cash flow growth rate is high) and under high uncertainty, exactly the conditions under which institutional investors most need high returns

Retail warehousing, shopping parks and leisure

Retail warehousing is generally defined as ranging from ‘bulky goods units’ to modern progressive shopping parks. As a sector it outperformed all other property markets in the last ten years, with returns surpassing all other forms of retail property investment. It is generally believed that the sector will continue to outperform other property sectors and will be at the forefront of the wider retail market. 2004 was a strong year for this sector and, in the early months of 2005, confirmed transactions, together with speculation, suggest that this year will be no different.The market is maturing in all respects. Investors are becoming increasingly discerning and have heightened requirements in the fields of retail warehouse management, marketing, commercialisation, design, tenant and rental aspirations, expectations and quality advice from specialist consultants. Retailers are maturing in their requirements, with intensive utilisation of space, flexibility of use and store design and signage, and in some cases taking hard-earned lessons from the high street to the new arenas of out-of-town shopping.The market has seen a steady increase of new retailers: traditionally the vanguard of a few provide both the property market and the consumer with an ever-increasing range of retailers.Ironically, some of the earliest retailers who ventured out of town, such as the electrical retailers, have found that rentals have risen to such a level that they are being forced back into secondary locations. This creates opportunities for landlords to be creative asset managers.

Shopping Center Rentals: An Empirical Analysis of the Retail Tenant Mix

This article concentrates on the economic importance of the retail tenant mixture within shopping centers, and provides empirical evidence of the influence of tenant type on base rentals. The sample examined comprises 293 New Zealand shopping center leases. The results indicate that for some generic types of retail tenant (but not all), the type is an important determinant of shopping center base rents. It is also found that base rents decrease in size and increase with center turnover. Occupancy costs are tentatively found to be a negative determinant of base rents. These results are generally supportive of the recent shopping center space allocation theories of Brueckner (1993) and Eppli and Shilling (1993). The article also has several implications for the analysis of evidence in the rent review process.