Real Estate Investor Magazine South Africa November 2013 | Page 48

STRATEGIES

BY XOLANI MEVA

Establish A Turnaround Strategy
For your struggling shopping centre

D

isappointingly perhaps, there is no blue
print or ‘one size fits all’ approach to
turning around a struggling shopping
centre. The reasons a shopping centre may be
struggling may be due to myriad factors, among
others, general economic downturn, strategic
downsizing by chain stores, over-concentration
of shopping centres (or overbuilding in same
area or vicinity), the decline in the turnovers of
existing tenants, or even an increase in online
shopping among consumers.
According to Parento Limited, a shopping centre
investor in South Africa, although regional shopping
centres should generally continue to perform
reasonably well, landlords are currently being
challenged with vacancies and resistance to rental
increases as shop tenants feel the squeeze of limited
economic growth and rising consumer costs.
In order to establish a turnaround strategy, a
thorough analysis of the specific circumstances
surrounding a particular shopping centre
should be conducted. It should analyse factors
such as the competition, tenant mix, rental
rates, centre physical layout / design, parking
availability and the profile of customers (ie If
the shopping centre is located in a township and
the majority of shoppers do not have their own
vehicles, is the shopping centre public transport
friendly?). This strategy is essentially a form of
‘re-researching’ the surrounding community, as
well as the shopping centre facilities.
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November 2013 SA Real Estate Investor

Parento has reported that the most notable
shift in development activity in the past 12
to 18 months in the local shopping centre
industry has been towards the “RE” concepts
of RE-brand, RE-furbish, RE-design and
RE-tenant.
Upon completing an analysis, a plan can be
developed around how to remedy the identified
shortcomings. The remedial plan may often
necessitate redevelopment a nd ma rket
repositioning of the shopping centre. This will
almost always require more funding, ideally,
lower debt and more equity capital to invest.
A new re-leasing campaign may also need to
be undertaken by an underperforming centre,
which could include focusing on new or improved
anchor tenants, at better terms to the shopping
centre as the better quality of an anchor tenant is
a draw card for visitors to the centre. It is highly
important to secure a good anchor tenant, but it is
also just as important to note that there should be
a second or third anchor tenant, such as a clothing
anchor, or an entertainment type anchor tenant,
which will assist in fostering repeat customer
visits. It is also worthwhile to secure a destination
type tenant, such as sporting goods retailers or
specialty goods retailers.
The above-mentioned analysis will have
also had to include research around what the
surrounding community would be interested

in. Often the temptation for the centre
management is to let out retail space as quickly
as possible, or to the tenant promising to pay
the highest rent per square metre. This tenant
may however not necessarily be the type of
service the surrounding community needs,
and may therefore struggle, which will have
a negative result on the shopping centre’s
financial performance.
A balance needs to be struck when it comes
to the re-letting of retail space between larger
tenants and smaller tenants, as while bigger
tenants are generally more financially secure,
if they do make the decision to close the store,
the shopping centre could be severely impacted.
It is also very important to consider aspects
such as the visibility of tenants inside the
shopping centre, the improvement of access
to the centre by building extra and more
convenient entrances, or the implementation of
methods to improve shopper circulation.
All of these efforts will also need to be
communicated to the general shopping community
in order to inform them of the changes and
improvements which will be made. Marketing
initiatives, such as events and entertainment, are
crucial to assisting in re-launching the centre to the
surrounding community and existing customers.

RESOURCES
Business Partners Limited

www.reimag.co.za