Tenant mix and ownership
By: J. David Chapman/September 1, 2016
Tenant mix is recognized as a critical success factor in large retail malls.
According to the International Council of Shopping Centers, the correct selection of retailers and services is the most significant driving factor in getting customer visitation and building a sustainable, profitable retail mall. For shopping centers, the property manager and owner make the leasing decision regarding which tenants to offer leases to depending on this tenant mix. In a robust economic environment, this decision is relatively easy in a retail mall with a single entity making this decision.
The Oklahoma City metro has seen significant growth in commercial shopping and entertainment districts such as Bricktown, Automobile Alley, the Plaza District, Midtown, Film Row, downtown Norman and downtown Edmond. Tenant mix gets more complicated in these districts because the properties in these districts tend to have multiple owners and consequently have many decision makers considering, or not considering, the tenant mix.
The University of Central Oklahoma Real Estate Club recently took a tour of Oklahoma City’s Midtown District hosted and guided by Midtown Renaissance developers Mickey Clagg and Chris Fleming.
Mickey and Chris confirmed the importance of their significant ownership in the Midtown District and resulting ability to appropriately choose the proper tenant mix as a key success factor. Successful developers such as Midtown Renaissance understand that they are only as successful as the tenants that occupy their properties and make sure that the companies in the district will complement each other and minimize competition between tenants.
Compare the Midtown ownership scenario with that of another growing commercial and entertainment district – downtown Edmond. Downtown Edmond has many different property owners with each making separate, independent decisions on tenant selection. At one point, the downtown Edmond district had three Italian restaurants, Othello’s Italian, Hideaway Pizza and Italian Jims. The latter of the three closed its doors in 2015.
On the other hand, KatieBug’s Gourmet Frozen Desserts and Rocket Fizz Pop and Candy store both opened recently. It appears that these two new businesses are thriving – taking advantage of a similar demographic customer base while not directly competing with each another.
While there might be advantages to having many different property owners in a district, it appears it can make the task of choosing the important, proper tenant mix a challenge.
J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).