Thomas J. Drought
As consumer behavior expert and best-selling author Paco Underhill pointed out in his book Call of the Mall, it became clear over time that the first generation of stand-alone enclosed suburban malls suffered from what Underhill refers to as “the mall’s fatal flaw”: “its lack of mercantile DNA”. To a large degree, commercial development has historically been “an industry driven by real estate, not retailing.” But as the commercial development industry has evolved over the last decade, architectural designers and developers have developed an increasingly sophisticated understanding of the importance of creating dynamic, diverse and experiential mixed-use environments; spaces and places that offer a unique and appealing blend of retail, dining and entertainment options in a live, work and play context. More so than ever before, the question to ask is not just where, but also what.
While the “location, location, location” cliché still applies, successful developers understand that a diverse and dynamic tenant roster is a critically important prerequisite to establishing and maintaining a great center. Today’s consumers have options. Standing out amidst an increasingly crowded field of competitors requires elevating your project to the top of that list of options by having tenants that give visitors a reason to come, stay and spend. And when an iconic national retailer opens their first store at your center, you’ve taken a giant step in the right direction.
Successful developers use a range of strategies to attract first-to-market tenants to their projects.
They include:
Generate excitement
Signing first-to-market tenants is both a sign that developers are doing something right and a promising indicator of future success. Big names attract other big names, which generates big buzz. Once a quality space in a superior location is combined with “best-in-class” retail, dining and entertainment options, there is real potential for success. The basic ingredients for a successful mixed-use development – a compelling combination of appealing design, strong demographics and a diverse blend of retail, dining and entertainment options – are precisely what makes a retail/mixed-use center a desirable destination; not just for first-to-market tenants, but for anytenant. Retail tenants (like shoppers) want to be where the action is.
Make it work
The most effective leasing strategy for appealing to, negotiating with, and signing first-to-market tenants for a new project can be summed up in one simple phrase: Understand their priorities and exceed their expectations. Savvy developers understand that the more they can simplify a complex calculation by removing as much uncertainty as possible, and the more that they are able to establish trust, demonstrate follow-through and move forward with a collaborative team approach, the more success they will have. The key is to make it abundantly clear that the burgeoning relationship between the tenant and the developer is a true win-win scenario, and the best way to reinforce that dynamic is by engaging the tenant and working closely throughout the negotiation process. Whether it is collaboration between attorneys, the developer’s construction team proactively assisting with permits and approvals, or the operations team ensuring that the tenant’s site visits are both memorable and informative, a holistic team-based approach is the best way to ensure that a process with a lot of moving parts moves forward with effective and efficient communication at all times.
Coordinate and cooperate
It is important to remember that whois in the space is a defining part of whatthe space ultimately becomes. Understand your priorities. When accommodating first-to-market tenants regarding design, development and construction considerations, understand that a lot will be expected from your team. From incorporating tenant input in design and development decision making, to being flexible on details regarding build-out and grand opening, accommodating tenants’ needs is critically important. Tenants are more than just a commercial ornament; they are inextricably linked to the social and retail dynamics of the space. In one recent high-profile tenant negotiation, for example, a developer’s construction and design teams made three cross-country trips before the lease was even signed to discuss details and ensure optimal cooperation and coordination. Attorneys need to keep lines of communication open at all times, and developers should make every effort to collaborate, exchange plans, information and other important materials promptly, and use their marketing team to coordinate signage, marketing, PR, grand opening promotions and other special events.
Cover the bases
While some potential tenants will prioritize access and infrastructure and some will focus primarily on design and aesthetic considerations, first-in-market tenants will look at the whole picture when considering a site. Asking if logistical or aesthetic elements are the most important factor is like trying to decide which is more important before you go on a road trip: the car or the gasoline. It all starts with the one thing that you cannot compromise on – location – and a first-to-market tenant has to get excited when they hear where the project is located. Once that is established, however, there is a lot of room for flexibility. First-to-market tenants have high standards, and they want to ensure that their space will provide them the visibility, frontage and parking that they are looking for. They want to hear who else is on board, and they want to know that their brand will blend well with other tenants. They want assurance that their space will be part of a larger mixed-use equation where appealing dining and entertainment options will keep potential customers on-site day and night, and they want to know about other uses that may broaden the audience and demographic appeal of the project. Developers working to attract premier tenants should be able to provide satisfactory answers to these important questions.
Distinguish yourself
While promising market demographics gets you in the game, the characteristics of the project itself will get you the win. A good demographic fit with a possible tenant opens the discussion, but to close the deal, developers must sell the merits of the project and explain what separates it from marketplace competitors. First-to-market tenants view unique and defining elements as a real asset. Successful developers will point to things that establish or enhance a defining sense of place: a great central quad or park to hold outdoor concerts and events, or a unique landmark. Anything that catches the eye and works on the emotions of visitors can help distinguish and define your project. Whether it is an exciting entertainment component, or even just subtle-but-important details like valet parking and other special services, prospective tenants want to know that they will be somewhere special.
Mix it up
From a leasing perspective, building a tenant roster with a mix of local, regional and national brands can be a real asset. Big names can generate significant leasing momentum, but it is also important to consider how alltenants will respond to that mix. Depending on your market, local and regional tenants can be a critically important part of the equation. In recent years, theseare the tenants that have also been looking to upgrade their locations and open new stores. An intimate familiarity with your market is obviously important when evaluating these tenants. The best and most attractive local and regional brands are well established, generate great numbers, and can attract loyal customers who are already familiar with their products and services. They also tend to have great service and they know their local customers very well. These tenants can contribute to a vibrant and appealing mix of retail, dining and entertainment options.
While it is undoubtedly helpful to have a preexisting relationship with a brand in order to secure a first-in-market tenancy, it is by no means a prerequisite. The big names and headline-making tenants are sophisticated enough to recognize quality spaces and places. They recognize good opportunities, and developers who can present them with those opportunities will frequently find themselves rewarded with first-to-market tenants that can provide a dramatic and defining identity for a new center.
— Thomas J. Drought is senior vice president and director of leasing with Glimcher Realty Trust