Understanding Shopping Centers
- a Lender's Perspective The value of the retail shopping property lies in
the retailer’s ability to generate sufficient sales to pay rent and
make a profit. Some retailers generate low sales per square foot of
retail space but operate successfully on very high profit margins.
Others, such as food stores, operate on extremely low profit margins
but have tremendous turnover in merchandise, so the volume of sales
makes up for the minimal profit margin. The retail shopping center is
an important point of contact between both kind of retailer and the
purchasing public. The retailer’s success determines the success of
the shopping center, and the center’s ability to draw the proper mix
of the buying public spells success or failure for the retailer. An
analysis of retail sales facilities must focus on information about
shopping patterns, the economics of retailing, traffic flow, and
retail design.The term shopping center is used here, as defined by the
Urban Land Institute, to designate “a group of commercial
establishments planned, developed, owned, and managed as a unit
related to location, size, and types of shops to the trade area to
which the unit serves.” Shopping centers are often classified by the
market area they serve—region, community, or neighborhood. As a
result of recent trends toward specialization in retailing, however,
shopping centers may also be classified by the type of shopping
offered in the center. For example, specialty centers may offer
high-fashion or high-tech shopping, while discount or outlet centers
offer continuous discounting in all stores.A lender’s analysis of
the shopping center operation and expenses often focuses on the design
of the center and the location of tenants within the center. For
successful operation of a shopping center, it is not enough simply to
fill a center with tenants and offer their wares to the public.
Leasing retail property requires knowledge of products, customers, and
the relationship between them. If the retailers, architect, leasing
agent, and developer cooperate closely, the retailers can gain the
maximum possible exposure to the proper customer mix at the most
reasonable cost to the developer and at a reasonable operating expense
for each. The rest is up to the buying public.
To obtain further information on
commercial property types and descriptions please visit CEMLending
Connection. This article is copyright of CEMLending
Connection. This article may be reproduced as long as
author's name and all links remain intact.
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