Boosting Returns On Retail

April 11, 2016

Retail properties are enjoying a reconnaissance this year, thanks to low vacancy rates and positive net absorption rates. And, as a result, asking and effective rents were up by 2.0 percent and 2.2 percent, respectively, during 2015. What’s more, some commercial real estate experts are predicting a 4.0 percent increase in the year to come.

So, how can you take advantage of the market conditions to maintain retail success in 2016? Remember that the customer experience is more important than ever. Though the reasons for market booms and slowdowns may shift, retail landlords can maintain rent growth by delivering experiences that shoppers want, and presenting attractive opportunities to potential renters.

While trophy assets are a must-have for any commercial real estate portfolio, the majority of shopping nationwide happens below the luxury center mark. Many will rush to a high-end option, but if the market doesn’t bear demand for luxury shopping, other retail opportunities should spark more interest among savvy investors.

Many small businesses and renters place priority on a few key benefits within a potential retail space. The first is surrounding businesses. Opening near a compatible – or sometimes even competitive – business helps to guarantee customer traffic that is interested in what’s being offered. Retail spaces also tend to fare well in safe areas where restaurants or coffee shops are available, so customers have the option to shop, eat, and spend more time on-site.

Additionally, retail properties with easy access to a targeted market will bear higher rental rates. Businesses want to be visible and convenient for their desired demographic to support retail traffic.

Don’t count out the importance of facility improvements and lease term flexibility. A commercial property that is in great condition with options for shorter or longer-term leases can also provide attractive benefits to a potential lessee.

Combining these key leasing factors with improved tracking capabilities and shopper metrics, savvy lessors can capitalize on the retail market trends. Not only will they gain valuable insight into who is shopping at their centers and what those customers want, they’ll be able to target potential lessees and boost overall asset profitability.

If you need help evaluating the factors that may affect your retail property, contact the professionals at Intelica Commercial Real Estate. Our market reports and forecasts for the St. Louis commercial real estate environment can help you position your portfolio for success.