Geotech has been working to build a tool that can be used widely by developers & leasing agents to build a picture around finding the right mix of tenants for commercial development opportunities.
We were approached by a developer building a small commercial project in South East Queensland and they were looking to find the right mix of tenants for the centre. What had become quite evident was that although the client had approached a fuel company about locating a petrol station on the site, he knew very little about the types of retail businesses that might be appropriate for that retail precinct.
The scenario above is a common theme, we had been approached in the past to help other developers better understand the right tenancy mix for a given retail precinct to help narrow down the choices and focus instead on the businesses that would have the best chance of success.
So how does this work and how does one arrive at a sustainable position?
The first stage in determining a good tenancy mix is to understand the supply and demand picture for the likely trade area around the proposed development. This involves extracting both residential & business demographics within a 3km radius of the site. Since potential customers don’t always make a buying decision from home, it’s important to also look at the types of people that work in the trade area. It’s also important to know that workers will typically only travel about 1 km to make a purchase during lunch time and any further than this and your return on investment diminishes significantly. Highly destinational businesses should be more concerned with the residential demographics whereas impluse driven brands rely more on transient passing traffic (foot and/or vehicle).
The next stage is to segment the types of businesses the development is likely to appeal to and map out the current supply picture. Ideally you want complimentary businesses that can feed off each other. For example, if the residential demographic in the area skews towards families with children, then a day care centre, medical centre, and a female services business ie beauty salon might be a good fit. It is then important to map out where the closest competitors are for each of these businesses types. Customer will drive further distances from home to frequent a shopping centre or business then they will if working.
The next phase of the project would involve rating the different industries based on the likely demand picture. If looking at childcare for example the best measures of potential demand would include;
The process would be to view all of the information available to assess the potential viability of a business model based on above steps. Obviously every business model has different requirements & minimum levels of revenue to be successful, however the process outlined above would be an important element in the due diligence process.
In addition to the research on what type businesses might be suitable for this type of development, Geotech can then score each industry out of 100 and grade the potential suitability. For the developer, this would also include an assessment on traffic flows, access to the site, signage, and likely population growth. We also have extensive experience within the petroleum industry and what drives fuel sales.
The benefits also flow to the leasing agent in that we can identify the right types of complimentary businesses to approach based on the research & analysis therefore saving time and money in targeting the right tenancy mix with the greatest chance of success. No one benefits from an unhappy tenant.