Leasing of Shopping Centre

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Leasing Strategy of a Shopping CentreLeasing Strategy of a Shopping Centre

Date: 29 Jun 2002

Speaker: Ivan Ng, Government Property Agency

JUNIOR ORGANISATION Pre-Qualification Structured Learning

THE HONG KONG INSTITUTE OF

SURVEYORS


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C

ontents

Part 1 Types of shopping centre

Part 2 Leasing strategy for a new

shopping centre

Part 3 Tenancy administration

Part 4 Past examination exercise

Part 5 Q & A


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Part 1Part 1 Types of ShoppingTypes of Shopping

CentreCentre


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1. Types of Shopping Centre

Territorial -Festival Walk, Times Square, Pacific

Place

District -- Tuen Mun Plaza, Dragon Ctr

Local/Neigbourhood -- Wong Tai Sin Estate

Shopping Centre

Thematic -- Golden Shopping Ctr


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1.1 Determination of Types of ShoppingC

entre By location (district/accessibility)

By size

By quality and quantity of customers By quality and quantity of tenants

By the Landlords intention


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Part 2Part 2 Leasing strategy for aLeasing strategy for anew shopping centrenew shopping centre


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2. Leasing strategy for a new shopping centre

What do we want?

Location factors - transportation, competitors,

complimentary facilities Demographic factors - population, income group,

age. etc who would come and what do they

want?

Design - numbers of shops and sizes


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Tenant mix (by categories)

Anchor tenant - dont be dominated by

Department store Chain stores/Unique stores

Entertainment facilities

Location of tenants e.g. foodcourt etc. In US, large department stores at both ends with

small shops along the passageway



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Leasing process

Finding tenant - by Landlord or thru Agent

Agreed on location, term, use, area on rent

Sign the offer (binding) - payment of first months

rent and deposit

Fitting out

Signed the Tenancy Agreement (usually later thanpossession date)

Stamping


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Tenant Mix

by categories

by location

by size

by price


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How to determine the tenant mix?

Where you are (position) and what do shoppers

want to find in your centre ?

By survey, observation and analysis

Design of trade mix

Anchor tenant : department store

Category killers


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Middle

L ow

L ow M idd le High

High

C l a s s

Price

G u c c i

S w a n k D & G

Paci f ic P laceCityplaza

Crocodi le

S h o p p e r s



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Chain store or theme store

Food and beverage - restaurant or food court

Entertainment - ice rink, cinema, bowling centre Apparel/cosmetics, F & B???


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Turnover Rent (a profit sharing basis)

Mechanism - base rent or a % of the Turnover (gross

receipt), whichever is the higher

On annual basis but receive monthly (to reflect season

fluctuation)

Merits:

from Landlords point of view: while there is a guarantee

of minimum income, the Landlord can receive more if thebusiness is better than expected


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2. Leasing strategy for a new shopping centre Tenancy Agreement

Terms -usually 3 years certain

Why?

Excluding from Part V of Landlord and Tenant

Consolidation Ordinance -- 6 mths NTQ

Exclusion: A tenancy agreement for a fixed term of

three or more years which contains no provision

for earlier termination other than for breach


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2. Leasing strategy for a new shopping centre Excluding from Land Registration Ordinance S.(3)(2)

All such deeds, conveyances, and other instruments

in writing, and judgments, as last aforesaid, which

are not registered shall, as against any subsequentbona fide purchaser or mortgagee for valuable

consideration of the same parcels of ground,

tenements, or premises, be absolutely null and void

to all intents and purposes:

Provided that nothing herein contained shall extend to

bona fide leases at rack rent for any term not

exceeding 3 years.


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No need to be by Deed -- Conveyancing and Property

Ordinance S.4(2)(d):

(exclusion): the grant, disposal or surrender of alease taking effect in possession for a term not

exceeding 3 years (whether or not the lessee is given

power to extend the term) at the best rent which can

be reasonably obtained without a premium;


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Valuation of Shop

Comparison method - nearby shops of same

categories, rateable value etc. Zoning method

Vacant and to let? Should the shops next to each

other will have same unit rent?

But in reality not, as there is a tenant mix?


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Part 3Part 3 Tenancy AdministrationTenancy Administration


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3.1 Tenancy Agreement Terms

Area? State or not? Referring to plan?

Rent: including what? Any rent-free period, how to assess? Management

or A/C charges during rent-free, what provision

does given during rent-free


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3.1 Tenancy Agreement

Termination and break clauses

Rent review- refer to arbitrator or expert witness


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Expert Witness

usually professional

relies on own judgement for

decision

may be sued for negligence

appeal can be made on valuation

error

simpler procedure

fee is various

Arbitrator

may not be profession

made judgement on evidence

submitted

immune from proceeding

appeal only on point of law

cumbersome procedure fee follows the scale of fee


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Option to renew

Users requirement? Whether other use require

landlords approval?

Submission of gross receipt for T/O rent

Landlords obligation

Insurance and Indemnification


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Tenants obligation

Maintenance responsibility -- usually landlord be

responsible for external and structural while tenantto non-structural and internal repair

Sub-letting

Stamp Duty


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3.2 Technical and Management issues Fitting out requirement

MOE requirement

Air-conditioning provision Electricity provision

Location of lifts and escalators

Directional sign - directory and ceiling hanged


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3.2 Technical and Management issues

Toilets facilities

Telephone ? Where and how many ? Types

ATM machine/bank

Seats

Landscaping

Ambient music Odour or smell


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3.2 Technical and Management issues

Marketing and Promotion

Regular events e.g. fashion show, car exhibition,

lucky draw, seasonal greetings

VIP card to patronage - given respect for frequent

shoppers


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3.3 Tenant mix review

Budgeting at the end of each year

Review the performance of the centre and the

tenants performance, by categories and unit sale 3 R

Renew, Relocate, Remove


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3.3 Tenant mix review

Sales Performance

Rental Payment

Management Problem

Financial Status

Competition with others

Any new replacement through application list or

in the market Magazines, Agents, etc.


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3.4 Interesting tips for ShoppingC

entre

Shopfront transparent, signage, glass door, door

handle etc.

Shopfront design, attractiveness

Decoration, routine or seasonal

Flower pot, seats

Directory - Pamphlet


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entre

Information Desk

Toilets

Foodcourt location

Restaurants - types and location

C

hain stores Dept Store/Hypermarket as anchor tenant


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3.4 Interesting tips for ShoppingCentre

Display area

Booth/kiosk

Ambience music

Skylight


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3.4 Interesting tips for ShoppingCentre

4 P

Place

Price

People

Promotion


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entre

New Concept for Retail Leasing -- 4 R

Relationship - VIP for loyal customer

Retrenchment - Use IT technology

Relevancy - create an image

Rewards - give something back to shoppers


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Thank You!Thank You!

Documents

Leasing of Shopping Centre