by David Watt and Joe Valente
Tenant mix is widely regarded as a key element in determining the success of a particular retail scheme. The concept is generally defined in terms of a balance of traders which, when combined, allows a particular centre to maximise its trading potential by meeting the broad requirements and aspirations of consumers. Given the acknowledged importance of tenant mix it is perhaps surprising that little or no information is available concerning what precisely is meant by a suitable mix nor what level of importance retailers attach to it when selecting suitable premises.
Tenant mix was one of the issues addressed by a recent survey(*) of 100 retailers occupying over 70m sq ft throughout the country. The results compare the existing allocation of shopping space in the major retail centres throughout the country with the views of retailers themselves. In this way it is possible to contrast the proportion of space in shopping centres generally allocated to anchor stores, major multiples and independent retailers as well as non-retailing uses with the amount of space which retailers feel should be allocated.
Before comparing existing and preferred allocations of space it is worthwhile examining the importance attached to the concept of tenant mix by the retailer in selecting a suitable trading location. The retailers’ survey points clearly to the fact that tenant mix is not only the single most important factor in selecting a suitable location but is also regarded as a major source of occupier dissatisfaction (Fig 1). Therefore, the retailer’s view of tenant mix, management and service charges stand in sharp contrast to parking provision or public transport, for example, which are important considerations in determining the selection of suitable premises but relatively unimportant so far as sources of dissatisfaction are concerned. Consequently, an appropriate tenant mix is vital in not only ensuring continuing consumer interest but is, in itself, the most important factor for retailers when choosing a suitable location as well as being one of the more significant sources of dissatisfaction.
Anchors and units
According to our analysis of a large number of existing centres, anchor stores are allocated on average some 40% of space in major shopping centres throughout the country. In contrast, the retailers surveyed would like to see this allocation reduced to a maximum of 35% of total space (Table 1). The difference between existing and preferred allocation may not appear, initially at least, to be significant until its implications are reworked in absolute space terms. Given that the average size of shopping centres which are likely to be completed in 1991-92 is around 200,000 sq ft, the representation of anchor stores should, according to retailers themselves, be reduced by around 10,000 sq ft on average — a substantial amount of shopping floorspace that could be redirected to unit shops with direct cash flow advantages to the developer concerned.
Apart from the most suitable allocation of space preferred by retailers, the questionnaire survey also shed light on two further issues: namely the choice of anchor store and the manner with which secondary space is dealt. An analysis of preferred anchor stores lies outside the scope of this article, although it is important to highlight one particular issue — the fact that a larger number of retailers than expected highlighted the positive role to be played by major food stores within enclosed shopping centres. Issues such as the difference between food and non-food shopping trips were judged to be of secondary importance compared with two striking advantages of a location in close proximity to a major food retailer — the level of footfall generated and more often than not the direct access to parking adjacent to such stores. The reintroduction of convenience stores into shopping centres could therefore become an important feature of the 1990s.
The second, and interrelated, aspect concerns the need to adopt a much more positive approach to secondary space. Retailers are of the view that shopping-centre design places far too much emphasis on prime space to the detriment of secondary areas. Secondary space should not, according to the retailers interviewed, be filled as an afterthought or with those retailers unwilling to pay prime rents but rather with traders who are able, and indeed prefer, to operate from secondary locations. This requires above all an appreciation of retailers’ trading performance and an awareness of their own lists of suitable and unsuitable neighbours.
Multiples and independents
The 1980s witnessed a major sea change in the structure of the retail sector in the UK — namely the consolidation by major multiples of market share and the apparent demise of the independent sector — defined as those retailers trading from 10 or less outlets. As a result it became apparent that a certain uniformity of tenant mix was emerging across the country and that this was generally regarded as a retrograde step. Other commentators have suggested that the tendency towards national uniformity of tenant mix is largely irrelevant, given the local nature of most shopping trips. While this line of argument has considerable merit it is nevertheless flawed in so far as it takes for granted the loyalty of the consumer at a time of increased competition between schemes and between different town centres. Furthermore, it highlights the point that a suitable tenant mix is defined not simply in terms of specific characteristics of a catchment area but must also make reference to the existing tenant profile in adjacent shopping centres.
The importance attached to variety within shopping schemes is clearly reflected in the evidence from retailers interviewed. This suggests that twice as much space should be given over to the independent sector than is presently the case — 30% of shopping-centre space should be allocated to the independent retail sector compared with an existing average of only 15% (Table 1).
Retail and leisure
The 1980s was a decade when considerable emphasis was placed on the integration of leisure facilities and food courts within shopping centres. The rationale for this included not only the rising importance of leisure time but also the increasing awareness of shopping as a leisure activity. The incorporation of leisure facilities is also important in terms of differentiating between competing schemes. Such facilities have come to be seen as a way of enlarging the size of a particular scheme’s catchment area as well as increasing the frequency and length of shopping trips. While retailers generally agree that leisure and catering facilities meet many of the above aims, there is nevertheless considerable doubt as to the link between leisure and increased expenditure in shops. Indeed, as many retailers pointed out, it is doubtful whether the increased length of a shopping trip is beneficial so far as retail expenditure is concerned, since what may really be required is a continuous supply of new consumers entering the shopping centre. Given the retailers’ perception of the role to be played by leisure facilities, it is not surprising to find that most would regard a 10% allocation of space to such uses as appropriate — a proportion of space which reflects the current status quo but which is well below the level being proposed in some of the more recent schemes.
Conclusions
The importance of tenant mix in the retail development process derives from two sources: the need to meet the demands of local consumers and the fact that retailers regard it as the most important factor in determining the success of a trading location. As an unsatisfactory mix is deemed to be a major source of dissatisfaction, the need for the landlord to address this issue should be treated as a priority.
The retailers’ survey highlighted a number of key issues relating to tenant mix which should be the subject of careful consideration by all involved in the development process. It suggests that the role of anchor stores should be re-examined both in terms of the type of store involved and the amount of space allocated; that the independent retail sector should be allocated twice as much space than is presently the case, while the argument for incorporating considerable leisure facilities within shopping centres has not yet been made to the satisfaction of most retailers.
A suitable tenant mix does not occur naturally. It requires careful consideration of both consumer needs as well as those of retailers themselves, particularly at a time of increasing supply. Above all, it calls for a positive approach to be adopted which treats the scheme in its entirety and places due emphasis on both primary and secondary space. Initial research must be coupled with continuous monitoring of the catchment area in order to change the balance of traders as both supply and demand evolve in a particular location. This presupposes a degree of management flexibility which does not sit entirely comfortably alongside the current landlord/tenant relationship.
(*) Retailing into the 90s — the multiples’ choice. Debenham Tewson Research.
