When Leasing is Programming
The art and science of building tenant rosters that drive traffic, build brands, and boost bottom lines
For retail centers, quality programming is an increasingly popular and prevalent feature. From tenant activations to special events and promotions, creative and collaborative programming is an outstanding way to elevate the profile of a center and give people reasons to visit more often—and to spend more time and money when they do. The best examples of programming reinforce the notion that the center is more than just a transactional space, with experiential elements that elevate the center to the forefront of the collective community consciousness. Instead of just a place to buy, it’s also the place to be.
But programming and engagement can and should be much more than just a clever marketing campaign or a tree lighting around the holidays. On an ongoing basis, all the community concerts and Yoga in the Park sessions can’t overcome the foundational element necessary for great programming: thoughtful and strategic leasing. Building a tenant roster that features a vibrant and synergistic tenant mix activates a retail environment in ways that provide many of the same benefits of active programming, prompting people to want to spend more time at your center.
From modest community spaces to larger-scale regional endeavors, and from ground-up projects to inspired redevelopments, leasing-as-programming is consistently one of the shared characteristics of commercial success.
Here’s how to make that happen:
Create energy with synergy
Creating retail synergies is a classic example of how to make 1+1=3. There are essentially two ways to synergize your tenant roster. One is to bring in unrelated concepts that share a common customer base or serve a similar demographic profile. Perhaps that’s a gym, a fitness-focused fashion brand, a high-end coffee shop, and an organic grocer. Because those connections aren’t always as obvious as this example, this kind of strategic tenanting requires a nuanced and sophisticated understanding of clientele and demographic subtleties.
The second recipe for synergy is to introduce related concepts that serve two distinct and largely disparate customer bases. Two grocers, for example—one nontraditional brand that primarily services restaurant users and another high end direct-to-consumer concept—could not only coexist, but complement each other. The best retail owners and operators use high-tech data-gathering to deepen their understanding of not only which customers are visiting their centers (and when), but how long they stay and where they shop during those visits. This helps with day-to-day operational necessities like parking and allows owners and operators to use these congruent-and-synergistic retailers to create a critical mass with real branding power. It fuels consumer habits and shapes the perception that the center is the place to go for groceries/dining/entertainment/service retail, or whatever the concept might be.
Play to your strengths
Whether merchandising a ground-up development or reprogramming an existing center, another proven strategy for building a compelling tenant roster is simply to lean into what works. Don’t overthink it! Figure out what people like about the center and cater to that. Once you know why they visit and what they buy, you can give them more options aligned with those preferences. Maybe it’s a dining mecca, a fashion hub, or a center known for offering lots of family-friendly entertainment choices. Don’t be afraid to get creative or expand the possibilities for your customers. In one recently remodeled center, NewMark Merrill complemented an existing Regal movie theater that was already a familiar destination for the community with creative new dining and entertainment options that include a DEFY Trampoline Park, an axe throwing concept, and a brewery/tasting room.
Connect to the community
Taking the time and effort to listen and respond to members of the surrounding community can also be an invaluable way to gain extraordinarily important information and insights that can shape smarter leasing. In another recent NewMark Merrill project in San Bernardino County, California, attending a series of community workshops allowed NewMark team members to listen closely to what community residents were asking for. Their unambiguous requests for more fresh and organic grocery options led directly to the inclusion of a Sprouts Farmer’s Market. A better understanding of community needs can sometimes inform decision-making that yields transformative results. In another NewMark project, replacing an underperforming Ralph’s with a Hispanic grocer not only nearly tripled the performance of the space, but became an anchor point, an identity, and a source of traffic flow that helped spur several successful complementary concepts.
There’s a strong argument to be made that strategic tenanting of retail centers is more critical now than ever. In the current environment, when breaking through the inertia of the couch and the allure of mobile ordering is a priority, making sure your leasing truly is programming is the best way to create a compelling and captivating tenant mix.
Hot Topics for the Summer Season
Industry buzz, hot topics, and future of retail
National industry events like the annual ICSC conference in Las Vegas are unquestionably among the highlights of the year for retail professionals. These are truly unique opportunities for networking, knowledge-sharing, and socializing with friends and fellow professionals. One of the hidden benefits of these events doesn’t come from formal presentations or even from potential deals—it’s the scuttlebutt: the informal conversations and undercurrent of discussion that (if you’re paying attention) give some outstanding insights into what’s coming next and what big issues will be shaping retail deals and decision-making.
It might just be the natural result of putting a large number of thoughtful, experienced, and informed retail experts in the same room together, but there nowhere else where you can get a better feel for the big themes, key trends, and influential ideas that will be molding the features on the retail landscape in the weeks, months, and years ahead.
Based on some of our conversations with peers and partners, here’s what we are seeing and hearing the most about at industry events:
We’re hearing a lot of speculation about interest rates—specifically, how cap rates and demand for assets will be impacted by rising interest rates. As interest rates continue to rise, owners and investors historically require higher yields to generate the requisite internal rate of return. We haven’t seen that dynamic impact pricing yet, but it definitely bears watching.
While the effects of inflation are still somewhat market-dependent, the national trends are unmistakable. According to data reported in June from the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) is up 9.1% over the last 12 months. Price tags on virtually all goods and services are going up steeply, and some landlords are responding by implementing new CPI-matching language in their leases. Beyond CPI monitoring, we’re also seeing retail owners and operators looking for other mechanisms to safeguard against inflationary dynamics: bigger rent increases, more frequent reassessment periods, and even rent calculated as a percentage of sales.
Another unavoidable theme in conversations with peers is technology. It seems like everyone is talking about or showing off their fancy new tech. We are seeing a number of increasingly sophisticated consumer tracking technologies, a topic near and dear to our own hearts here at NewMark Merrill. We have long been an enthusiastic early adopter of cutting-edge tech and the value of the data it can generate (anonymized and randomized to avoid any privacy issues) and we were one of the first to utilize Placer.ai. There is a lot of chatter about the potential for new security technologies, including randomized facial recognition solutions with built-in demographic profiling previously only available in small, indoor spaces, and it seems clear that retail professionals are actively looking to tech innovation for any edge they can get.
If industry buzz is any indication (and history suggests it’s one of the more accurate ways to get a feel for the current zeitgeist), inflation and tech innovation will be important topics to watch throughout 2022 and beyond.