Let's Increase Your Store Sales.
If you are an expanding retailer, Co-tenancy is a big factor when contemplating a location within a shopping or strip center. Co-tenancy in retail commercial real estate can lead to increased store sales if done right, however it can also have the opposite effect if you aren't careful.
The below outlines several ways we help our clients navigate co-tenancy:
1. Following the Tenants that Increase Your Store’s Sales
One of the first things we do with new clients is compare their existing store sales data to a list of various real estate site metrics i.e. vehicles per day, demographics, accessibility, visibility, and co-tenancy in efforts of finding patterns. Like clockwork, patterns emerge that we can then hone in on with our clients to replicate their top stores.
Once we identify the pattern, we can work that into our site selection strategy and pursue centers with uses that support our client’s business. For example, if our client sells supplements, and their stores that are adjacent to gyms perform 30% better on average, we're going to target centers with gyms.
2. Understanding the Ownership Group
Who owns the center? Is it a well established group with a large portfolio? Or is it a one off owner that inherited the real estate? If it is the latter, it is far more likely that they are going to put a bad tenant in that can negatively impact your use.
For example, if you own and operate a daycare center, the last thing you want is for the owner to put a smoke shop next to you as no logical parent wants to drop their kid off at a daycare adjacent to a smoke shop.
If you really like the site, but are worried about the ownership group, we help our clients limit their exposure by implementing use restrictions into the Lease which we will dive into further below.
3. Implementing Use Restrictions
We’ve seen class A centers turn into class C centers over the course of a few years because of unsophisticated owners that put poor tenants into their vacancies out of desperation.
To help mitigate against this, we negotiate use restrictions for our clients. We do so by working alongside their legal team or representation to identify uses they don’t want to share co-tenancy with, which often times include adult bookstores, smoke/headshops, pool halls, pawn shops, etc.
We also take this one step further and add language that allows the tenant to pay 50% of their rent for a certain period of time and if the violation continues beyond said time that the Tenant has a termination right.
As a reminder we help tenants with 10-100 locations with site selection services. If we could ever be of help in any way please feel free to reach out at ap@trueequityg.com or (512) 216-5495.
