How to reposition your retail property to be resistant to the economy

Written by Front Street Associate Director, Andrea Cockerham

Traffic count, median wages and median ages are demographics widely used to position Commercial Real Estate (CRE) in the appropriate location. Market economics– both national and local – control a majority of the fluctuations in these measurements as they help dictate laws, interest rates and GDP. One of the many great aspects of commercial real estate is that it is tangible; it is a real thing, it is real property. This allows owners of CRE to position and reposition their properties to fit the aesthetic and perception they desire; it allows for change – which in turn will attract the tenants you want and will drive the traffic you need. CRE is incomparable to any other investment.

Here are 3 ways you can position or reposition your CRE retail investment to be economy resistant.  

1)   Your Anchor Tenant – this seems like the most obvious idea, a great anchor tenant drives the majority of traffic to your property – so where do owners go wrong and/or right with their choice. Having a grocer as your anchor tenant is textbook, no matter what happens today, tomorrow or 10 years from now, everyone on the earth must eat to survive and do it frequently throughout the week. A grocery store is the best, safest and smartest anchor you can place in a strip center, bottom line. But, when positioning your building with a grocery anchor you should ask yourself, do your other tenants contradict the culture of that grocer? A great example is this; if your anchor grocer is Whole Foods Market and the next immediate tenant is Dominos pizza (no offense Dominos), you have just manifested a contradictory tenant relationship. 

If your anchor tenant is not a grocer, you still need to think of a product or service that will be relevant in 10 years. A fad product is a no, no and remember that fashion is justified by time.  Fashion is always changing; don’t place fashion as your anchor tenant.

2)   Promote Socializing – with the exponential growth of online retail in the past 10 years, it is vital to pair brick-and-mortar with a positive experience. If a patron at anytime feels uncomfortable at your property or in one of your tenants parcels, they are going to look for an opportunity to take their business elsewhere. Create an exterior environment that allows for people to stay at your plaza longer by adding amenities such as shaded walking, outside seating and tailored landscaping. Create an interior environment by choosing tenants that will foster sociality as well. Examples include, coffee shops, restaurants and big box stores that offer great customer care and service.

3)   Create an 18 Hour Facility – This concept is frequently applied to cities, NYC and Vegas being examples of 24-hour cities.  It is also applied to specific stores; CVS and Wal-Mart are often open 24 hours in areas with a dense population. Applying this concept to a retail strip center or really, any type of retail driven property type means more traffic for longer hours of the day. For example, if you place a coffee shop and a bar/restaurant at your facility, you just created a driver for 18 hours of consumers (pending local government restrictions) roughly from 6-7 am to 1-2 am.  Now you can market your facility as an 18 hour establishment when searching for other appropriate tenants or when you decide to sell this property out of your portfolio.

Tenant prescription is important if you want a popular, economy-resistant facility with small turnover. Additional examples to consider when repositioning your property include providing appropriate transportation ingress and egress and as well as creating a facility name that is no more than three words that describes the geographic location of the property.