Don't Lease to Tenants 'Off Brand' from Synergy

Although the model of the traditional shopping mall—one or more big box or anchor stores as a destination and smaller in-line tenants that benefit from the foot traffic—has changed over the years, the concept of a synergistic relationship among tenants continues. Convenience is key and if you don’t realize the benefit of synergy, which can create loyalty from shoppers who know they can get everything they need with one trip to your center, you’ll lose out and so will your tenants. This is especially important in scenarios where you have a percentage rent agreement with the tenant. And businesses that create a shopping destination—for example, a combination of a dry cleaner, supermarket, a pizza parlor, a hair salon, and a gym or boutique fitness business in a center—are very unlikely to leave. They benefit from their proximity to other supportive businesses which make that center a one-stop shop.

But if you get desperate because you need to fill vacancies, you might be tempted to make a deal with tenants that don’t fit the brand you’re trying to create. While this can be a way to keep occupancies high in the short term, it can generate greater vacancy down the line. So take a good look at the overall plan for your center in terms of maximizing the crowd you can draw and try to sign leases with only those tenants who make sense in that scheme. If you can’t find the perfect fit and still need to compensate for the loss of rent, aim for short-term leases and pop-ups so that if a tenant is “off-brand” for your property, you can easily lose them if need be.