10 things to improve your occupier relationships

Retail, leisure and restaurant occupiers often ask me why some landlords/investors don't appear to understand their business proposition. They are both surprised and frustrated that elements of the property market do not seem to be as attentive to them as they think they should.

…There is an alternative: the easy in/easy out model can certainly work, though it’s hard to achieve in practice. I firmly believe that most landlords will find it easier to build better relationships with occupiers that benefit all parties.

I think their frustration is partially justified, and is largely a legacy behaviour from market conditions that no longer exist any more. The days of monoculture development, when retail/leisure schemes would almost let themselves are a rapidly fading memory. Mixed use developments require much more effort to get the right kind of occupational transactions over the line. 

To assist landlords/investors who are keen to lease more efficiently and effectively, we've gathered ten key points from the P-THREE team that will help them achieve optimum leasing arrangements and secure more contented occupiers.

1. Branding - occupiers will often now only consider developments that reflect their brand. Properly understanding an occupier's brand can help determine whether they are a serious occupational contender for a landlord’s particular scheme. Understanding means doing much more than picking up a brochure – detailed desk research and store visits are ‘must do’s’. 

2. Clarity of scheme proposition - while appreciating an occupier's brand is important, being clear about an individual scheme's own proposition - aligning prospective consumers, the occupier brand and the property brand - is arguably even more significant.

3. Data - retail and leisure operators are often well ahead of the curve, compared to their property counterparts. Landlords who can furnish potential occupiers with figures that help them gauge potential
   takings will give themselves a competitive advantage.

4. Leasing flexibility - the irrevocable occupier demand for shorter leases should be met by leases outside the L&T act, or creative alternatives. One of retail/leisure occupiers’ biggest gripes is inflexible leasing packages.

5. Sustainability - the consumer-led move towards greener credentials has been well understood by retail/leisure occupiers, and are now increasingly an important pillar of occupiers' ESG targets. Landlords
   who fail to align their own standards will find occupiers unwilling or even unable to deal with them. 

6. Customer-centricity – some landlords have been referring to their occupiers as customers for some time. It’s a good habit to get into. Occupiers frequently complain about faceless landlords – improving visibility gains trust and builds loyalty.

7. Occupier fundamentals – it may not be sexy, but fully appreciating an occupier's price points and product offers (see also Point 1 above) is vital. Building personal relationships can go a long way here. Without it, developing an effective tenant mix that creates maximum synergy for any individual property development will be difficult, if not impossible.

8. Technical requirements – no, don’t switch off: understanding the boring small print about what occupiers need - from power supplies to air extraction values - can not only help cement a deal it can be a deal breaker. The rush to become more sustainable (see Point 5 above) can have unintended consequences. For example, removing a carbon-emitting gas supply means occupiers might need a more highly specified electricity supply instead.

9. Wall of costs – as everything from utilities to staff costs is likely to continue in an upward spiral for the foreseeable future, occupiers are increasingly likely to be caught between a rock and a hard place, as the ability to pass on costs to consumers is finite. Landlords who can creatively reduce or at least dampen upward cost movements (see Points 4 and 10 in particular) are likely to retain solvent (ie income-producing) occupiers for longer.

10. Service charge – whatever the property industry tells them, occupiers often see service charges as a rental surcharge, which in some cases now exceeds the rent itself. This is clearly nonsense. Landlords who review whether they should outsource management to third parties or take it in-house and then take an active role in determining how management costs can be stripped back to an appropriate minimum will be leading a more sustainable occupational and investment cycle. 

Many landlords, such as Shaftesbury, have already successfully applied many of these points, but there are plenty of others who have yet to invest the time, effort and hands-on commitment that will now be required to secure the best occupational deals in their developments. Ultimately, of course, it is in their own interests.

And for those landlords/investors unable/unwilling to do the above? There is an alternative: the easy in/easy out model can certainly work, though it’s hard to achieve in practice. I firmly believe that most landlords will find it easier to build better relationships with occupiers that benefit all parties.

Article by Justin Taylor, Co-founder P-THREE

Photo credits: Unsplash