RESEARCH PAPERS

September 2002 Volume 4, Number 14

Managing tenant mix in shopping centres in the United Kingdom

Mary Lou Downie, Peter Fisher and Cheryl Williamson

Northumbria University, Newcastle upon Tyne

 RICS Foundation September 2002 Electronic Reference PS0414 Published by RICS Foundation 12 Great George Street London SW1P 3AD, UK The views expressed by the author(s) are not necessarily those of the RICS Foundation. Neither the author(s), the RICS Foundation nor the publisher accept any liability for any action arising from the use to which this publication may be put.

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Editor Dr Les Ruddock School of Construction & Property Management University of Salford Salford Lancs M5 4WT United Kingdom Tel: +44 (0)161 295 4208 Fax: +44 (0)161 295 5011 Email: l.ruddock@salford.ac.uk Panel of referees
Ghassan Aouad University of Salford Paul Bowen University of Cape Town Peter Brandon University of Salford Jose Luis Caramelo Gomes Escola Superior de Actividades Imobiliarias Jean Carassus Centre Scientifique et Technique du Batiment David Chapman University College London

David Lewis Harper Adams University College Colin Lizieri University of Reading Jorge Lopes Instituto Politecnico de Broganca John MacFarlane University of Western Sydney David Mackmin Sheffield Hallam University Nick Millard Bruton Knowles John Moohan Nottingham Trent University Bev Nutt University College London Jacob Opadeyi University of the West Indies Martin Pearson University of Northumbria at Newcastle Steve Pearson South Bank University Srinath Perera University of Moratuwa John Perry University of Birmingham Martin Sexton University of Salford Li Shirong Chongqing Jianzhu University Martin Skitmore Queensland University of Technology Martin Smith University of Nottingham Alan Spedding University of the West of England Peter Swallow De Montfort University Julian Swindell Royal Agricultural College Carlos Torres Formoso NORIE/UFRGS Thomas Uher University of New South Wales Tony Walker Hong Kong University Ian Watson University of Salford

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Paul Chynoweth University of Salford Neil Crosby University of Reading Mervyn Dobbin De Montfort University Brian Eksteen University of Port Elizabeth Chris Eves University of Western Sydney John Eyre University of Exeter Timothy Felton University of Plymouth Dominique Fischer Curtin University of Technology Richard Grover Oxford Brookes University Stephen Hargitay University of the West of England Malcolm Hollis Malcolm Hollis Consultants Mike Hoxley Anglia Polytechnic University

Contents

Introduction The concept of tenant mix Comparison goods Convenience goods Anchor tenants Main space users What is expected of tenant mix? Attracting and retaining shoppers Differentiating between shopping centres Creating an exciting shopping experience Pedestrian flow Managing retail tenant mix The pressure for tenant mix change Management structures Monitoring tenant mix Proactive management Lease management case law Lease length and security Research methodology Research results Evolving tenant mix Location of stores Policies for managing tenant mix Monitoring tenant mix effectiveness Implementing tenant mix policy Tenant mix obsolescence Summary and conclusions Summary The future direction of tenant mix management Future research Bibliography

5 5 6 6 6 7 7 7 8 8 8 9 9 9 9 9 10 10 11 12 12 13 14 15 16 17 19 19 20 20

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Managing tenant mix in shopping centres in the United Kingdom

Mary Lou Downie, Peter Fisher and Cheryl Williamson Northumbria University, Newcastle upon Tyne, United Kingdom

Abstract

The variety and location of retailers within a group of shops, known as tenant mix , has been identified as a critical factor in the success or failure of purpose-built shopping centres. There have been numerous studies made of the impact tenant mix can have on profitability, but less is known about the way in which landlordinvestors approach the allocation of leases within shopping centres. This study aims to increase understanding of how they perceive and manage tenant mix. The report is based upon findings from in-depth interviews with investor-landlords, asset managers and letting agents, together with a larger questionnaire survey of asset managers and investors. The research is supported by a comprehensive review of existing literature. The report finds that: In terms of maintaining an effective tenant mix, landlords consider the anchor stores - those large enough and established enough to be shopper destinations in their own right - to be the most crucial factor. When deciding upon the location of tenants and shop units within a centre, interview and survey respondents prioritise whole centre issues such as pedestrian flow over retailer micro-location In a majority of cases tenant mix policies are informal, despite the need to produce written evidence of such policies as a defence against undesirable lease assignments by tenants. Turnover indices and shopper surveys are the main methods used to monitor the success of tenant mix policies. Monitoring is usually at sufficiently frequent intervals to highlight any changes in circumstances. However, policy reviews are more irregular and dependent upon stimuli such as tenant change, suggesting that monitoring is not necessarily used to initiate change where necessary.

The study concludes with recommendations on how shopping centre managers can make improvements to tenant mix policies. Such changes would ensure that shopping centres are more sensitive to consumer trends, maintaining an evolving tenant mix through proactive, responsive and flexible management. Received February 2001 Revised and accepted August 2001

Contact

School of Built Environment Northumbria University Ellison Building Ellison Place Newcastle upon Tyne NE1 8ST T: +44 (0)191 227 4722 F: +44 (0)191 227 3167 E: peter.fisher@unn.ac.uk E: marylou.downie@unn.ac.uk E: cheryl.williamson@unn.ac.uk

Acknowledgements The British Council of Shopping Centres The interviewees listed in Appendix A The respondents listed in Appendix B

MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM

1
Introduction
Tenant mix has been identified as a critical factor in the success or failure of purpose-built shopping centres (McGoldrick 1992) (hereafter occasionally referred to solely as centres ). Within the literature specifically addressing tenant mix, various approaches have been taken. Abratt et al (1985), Greenspan (1987) and Bruwer (1997) provide descriptions of the principles upon which tenant mix should be based, with the objective of advising shopping centre owners on how to maximise the success of their assets. CALUS (1975), Kirkup and Rafiq (1994) and Bruwer (1997) offer case studies of centres, analysing the strengths and weaknesses of their individual tenant mixes. Brown (1993) includes a discussion of tenant mix in his review of the theoretical bases of retailers location decision-making at the micro level, identifying both demand and supply-side determinants. He considers the shopping centre landlord s creation and management of tenant mix as the most important supply-side influence on retail location at the micro level. Despite this important role, little systematic research has been conducted into landlord or investor perceptions of tenant mix and methods of managing it. According to Brown (1993), this is part of a general lack of research into the issue of retail micro-location. This study attempts to increase understanding of how investorlandlords perceive tenant mix and particularly of how they manage it. Shopping centres inevitably pass from the status of new assets, designed to accommodate state-of-the-art retail practice, and decline into degrees of functional obsolescence. In order to maintain asset value, landlords need to monitor and adjust the tenant mix, but are constrained by the inertia of existing physical and legal arrangements. The research was carried out by means of in-depth interviews with investor-landlords, their asset managers and letting agents, followed by a larger questionnaire survey of asset managers and investors. A review of the existing literature in Sections 2, 3 and 4 precedes a description of the methodology in Section 5 and a report of the results in Section 6.

2
The concept of tenant mix
Abratt et al (1985) provide probably the most comprehensive list of the objectives and principles of tenant mix available. They rely on the definition provided by Kaylin (1973): "Tenant mix refers to the combination of business establishments occupying space in a shopping centre to form an assemblage that produces optimum sales, rents, service to the community and financiability of the shopping centre venture." Greenspan (1987), writing from the perspective of a leasing manager, describes a good tenant mix as a variety of stores that work together to enhance the centre s performance and operate successfully as individual businesses. These descriptions of tenant mix stress the underlying objective of maximising shopping centre profitability, and are therefore investor-orientated. They identify the key to maximising profitability, which is maximisation of sales through provision of the optimum service to the community. The concept of tenant mix design therefore involves provision of a range of merchandise and services, carefully chosen to appeal to the catchment shopping population, as described by Bruwer (1997). These services may include restaurants and other catering outlets, and increasingly they also include leisure facilities such as cinemas (Abratt et al 1985; Yap 1996; Roberts and Melvin 1999). In discussions of tenant mix, the provision of different types of merchandise is almost always replaced by a proxy namely various categories of retailer in order to classify the merchandise on offer. Classifications focus on characteristics such as price and quality, appeal to different lifestyle groups, and service levels. Kirkup and Rafiq (1994) provide a measurement-orientated description of tenant mix as: ...a combination of factors, including the proportion of space or number of units occupied by different retail/service types, as well as the relative placement of tenants in the centre .

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MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM

Brown (1993) suggests that although there are many possible classification systems available for these retail/service types, and some have been in use for long periods, they are all flawed. In addition he believes that the choice of classification influences our analysis of the tenant mix and of the underlying forces which bring it about. This aspect of the subject makes it particularly resistant to analysis. The definitions above draw attention not only to the mix of retail types offered, but also to the relative placement of the retailers. COMPARISON GOODS Northern and Leonard (1977) identify comparison goods as those purchased at irregular intervals, for long-term use, with suitability, quality, price and style being important factors in their selection. The group is epitomised by fashion and footwear, jewellery, and expensive household equipment. The reason for the increase in sales when comparison goods retailers cluster close together is their attraction to shoppers wanting to compare similar goods before making a purchase. Nelson encapsulated the effects of comparison shopping when he stated his law of compatible retailing in 1958: "Two compatible businesses located in close proximity will show an increase in business volume directly proportionate to the incidence of total customer interchange between them, inversely proportionate to the ratio of the business volume of the larger store to that of the smaller store and directly proportionate to the sum of the ratios of purposeful purchasing to total purchasing in each of the two stores." There are many studies of patronage behaviour which draw on psychological and social theories of behaviour, largely in US and Canadian literature. These confirm the importance of comparison shopping as a motivation for visiting shopping centres and this has long been held to be one of the primary reasons for designing and managing tenant mix (Reidenbach et al 1984). The current importance of comparison shopping for shopping centre investors returns is demonstrated by the following figures from Steventon and Wood (2000): comparison goods account for 72% of expenditure in the 400 leading UK shopping centres and an even higher rate of 87% of expenditure within the top 18 centres; of the top 100 UK centres, 91 are comparison dominated, i.e. with more than 55% of their sales coming from comparison goods. Hillier Parker (1997) noted a

massive swing towards domination of comparison shopping by multiple retailers, increasing their share by over 40% since the 1960s. Teale (1997) suggests this results from the multiples taking the bulk of space in new shopping centre developments over that period. As Nelson (1958) pointed out, the mutual proximity of compatible retailers, as well as their business volumes, are important in raising sales through comparison retail clustering. The concept of comparison shopping used in tenant mix management therefore has to include not only the selection of tenants, but their relative locations within the centre. CONVENIENCE GOODS Convenience goods are described by Northern and Leonard (1977) as those purchased regularly, so that convenience of location, selection and buying are important. The group includes food, newspapers and drinks products typically sold from local corner and parade shops, supermarkets and unit shops, some of which are situated in shopping centres. Steventon and Wood (2000) note that convenience shopping is more important in smaller shopping centres. Whereas only six of the top 200 UK shopping centres are convenience dominated, this type of use dominates most schemes outside the top 400. The relative importance of convenience and comparison shopping in the design and management of tenant mix therefore varies according to the size and nature of the shopping centre. ANCHOR TENANTS Analysts of the ways developers and investors let shopping centres, and thereby create the initial tenant mix, agree that the initial critical lettings are to one or more anchor tenants (CALUS 1975; Abratt et al 1985; Greenspan 1987; Brown 1993; Bruwer 1997; Kirkup and Rafiq 1994; Roberts and Melvin 1999). The anchor store is always relatively large and sufficiently well regarded, either in terms of quality, price or function, to be a destination in its own right. Other outlets will cluster about it and feed off the shopping traffic it generates. The choice of anchor tenants is therefore vital to the success of the overall tenant mix. The location of anchors within the centre creates pedestrian flows. By careful management, these can maximise sales potential and therefore rental income from the available floorspace, attracting shoppers to all areas of the centre.

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MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM

MAIN SPACE USERS The choice of anchor tenants determines which Main Space Users (MSUs) can be attracted to the next highest size range of units. These are usually smaller than the anchor store and some may have sufficient appeal to shoppers to be destinations, but many will function only as part of a comparison or convenience cluster. The anchor and its satellite MSUs together determine the attraction of the centre to the many other retailers needed to create the full range of comparison and/or convenience merchandise, which can maximise the appeal of the centre to the shopping catchment.

3
What is expected of tenant mix?
It is clear from the literature that considerable thought is devoted to the initial letting of shopping centres, building up from costly demographic or psychographic study of the catchment population to the creation of a tenant mix design (Greenspan 1987; Roberts and Melvin 1999). This acts as a basis for approaches by letting agents to a hierarchy of anchor tenants, leisure and service providers, MSUs, lesser tenants, and operators of barrows and kiosks. A study of the tenant mix literature reveals a wide range of benefits that an investorlandlord might expect to gain from this expenditure of effort and resources. These are set out below. ATTRACTING AND RETAINING SHOPPERS Perhaps the simplest expectation is that a centre should attract as many shoppers as possible. Gravity models emphasise the direct relationship between shopping centre size and a centre s potential attraction to shoppers. However, within the constraints of a centre s size, Abratt et al (1985) suggest that the "maximum attractiveness to the population of that specific trading area" depends on creating sufficient diversity in the tenant mix. This must, however, be part of a coherent merchandise mix, described by Abratt et al (1985) as "a balanced diversification of shops offering a wide range of products and services". There are obvious space limitations on centres abilities to offer a wide range of merchandise, leading to choices in aspects of tenant mix such as the balance of convenience and comparison goods and the range of price and quality (CALUS 1975). Bellenger et al (1977) found that the variety of tenant mix influences shoppers selection of a shopping centre, and Stoltman et al (1991) showed that it influences the frequency of shopping trips. The choice of tenant mix should satisfy any unmet demand for goods and services within a centre s catchment area (CALUS 1975). Shoppers surveyed by Reidenbach et al (1984) were motivated to shop at centres outside their home retail trade area primarily by perceived inadequacies in the assortment of goods on offer locally. A centre providing for shortfalls in the range of goods in an area can therefore retain local expenditure and capture sales from competing centres.

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MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM

DIFFERENTIATING BETWEEN SHOPPING CENTRES Abratt et al (1985) state that tenant mix should create a specific image for the centre, and position it in relation to competing retail centres. The need to differentiate a centre from its competitors has grown as their numbers have increased (Yap 1996). Because anchor store lettings in a centre determine the feasible overall tenant mix, they are influential in determining the range of merchandise which can be offered to meet the catchment s demand and position the centre in the retail hierarchy. Roberts and Melvin (1999) describe the psychographic approach to merchandise selection behind the design of tenant mix at Bluewater, opened in 1999 close to London s outer ring road. This resulted in a tenant mix designed to meet comparison shopping demand at the medium to high end of the quality and price range, differentiating the centre from Thurrock Lakeside, another large regional centre nearby. However, the role of anchor stores is even more important than this. Finn and Louviere (1996) found that anchor stores exert a dominant influence on shoppers image of any shopping centre and thereby on centre patronage. Darden and Babin (1994) show that this influence is exerted not only by an anchor s functional characteristics, but also by its affective qualities, which together contribute to its image in shoppers minds. Positioning a shopping centre in the retail hierarchy is therefore largely achieved through anchor store lettings. The overall merchandise provision is dependent on initial anchor store lettings, but choices of tenants as MSUs and for other units contribute to this objective. It has been suggested that the inclusion of a higher proportion of independent traders, rather than the ubiquitous uniformity of the national multiples, can contribute to increased differentiation between centres (Kirkup and Rafiq 1994). However, a study of five major UK shopping centres suggests that this effect is not fully utilised by asset managers (French 2000). Oswald (1999) suggests that over a centre s life individuality will decrease as local, niche and start-up retailers fail to survive the rent review process, being unable to match the rents paid by multiples. He suggests that rents should be tailored to the tenant s retail use, in order to encourage retailer diversity and enliven the mix offered to shoppers. CREATING AN EXCITING SHOPPING EXPERIENCE Shoppers can be attracted to a shopping centre by many factors. The investor-landlord s objective is for them to purchase goods and services, boosting retailers turnover and the share that they can take as rent. However, shoppers motivations for visiting

the centre may involve socialising with family and friends, browsing to gather information on possible future purchases and relieving boredom, rather than making purchases of goods or services. As Bloch et al (1994) comment, shopping centres have "transcended the role of purchase site to become a centre for many possible activities". The tenant mix can increase the amount of spending by addressing these non-shopping activities. Common methods are to provide opportunities for eating and leisure activities. By providing places to rest and eat, shoppers can be persuaded to stay longer in the centre, increasing the chance that they will spend. Wakefield and Baker (1998) investigated the relationship between excitement or emotional arousal of shoppers and their patronage behaviour. They found that tenant variety had a strong influence on shoppers levels of excitement, which are positively linked to their levels of spending, desire to stay at the centre and intention to return in the future. In this study tenant variety measured not only the variety of retail stores, but also food services and entertainment. Court (2000) develops the idea as fun retailing and tracks its implementation over recent years via the inclusion in shopping centres of cinemas and food courts. Bluewater s themed leisure villages are a recent example, providing break out areas targeted at different customer groups, including restaurants, cafes, cinemas, cr ches, a children s grotto and exhibition areas. Although the excitement-inducing features of tenant mix were previously associated with non-store food and leisure elements, Court notes that excitement is now expected to be provided by stores themselves, through aspects of their design, ambience and multimedia customer entertainment. PEDESTRIAN FLOW Lists of tenant mix rules identify the importance not only of selecting a balanced variety of tenants, but of locating them carefully within the centre, both in relationship to the centre s layout and in relationship to each other (CALUS 1975). Abratt et al (1985) express the objectives as "creating maximal pedestrian flow in order to ensure there is a 100% location for all tenants" and "a logical layout of shops", and suggest that developers tend to neglect this aspect of mix. Several authors note the problems of achieving optimum location plans, due to market weakness and larger retailers demanding specific locations (Abratt et al 1985; Kirkup and Rafiq 1994; Brouwer 1997). The location of anchor tenants and MSUs are critical decisions, drawing people through the centre from the access points, and avoiding areas of low pedestrian flow where few retailers can thrive.

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MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM

4
Managing retail tenant mix
THE PRESSURE FOR TENANT MIX CHANGE Retail formats are continually changing and, with the growth of retailing via the internet and interactive television, can be expected to do so at an accelerating rate. Greenspan (1987) stresses that a successful tenant mix needs to respond to such changes, requiring "continuous monitoring, evaluation and action on the part of the manager". Kirkup and Rafiq (1994) suggest three reasons for the increased difficulty in maintaining a successful tenant mix: heightened competition between centres, arising from their proliferation and consumers greater mobility, has created pressures for differentiation between centres by means of tenant mix a difficult retail market, such as that suffered in the UK in the early 1990s and again in middle-market fashion in 1999/2000, will result in falls in retailers space needs and a reduction in landlords flexibility in managing tenant mix ever-changing demographics, fashion and consumer demand, which lead to the decline of some older retailers and the brisk expansion of new ones, often with different space requirements

tenant mix policy: the investor/developer may engage an asset manager, who in turn may appoint an on-site centre manager, who is the day-to-day point of contact with the retail occupiers. One or more letting agents may also be involved. All three management layers, and potentially others, are involved to a greater or lesser extent in the management of tenant mix. MONITORING TENANT MIX The prerequisite for successful management of retail tenant mix in any centre is to monitor its performance - that is, the level of profit achieved by its retailers and the implications for the centre s rental income and capital value. Greenspan (1987) advocated the constant monitoring of sales performance, competition and demographics for this purpose. She suggested continual manager-tenant communication to allow managers to understand tenants business needs. In the USA the use of turnover rents informs and facilitates this dialogue, but in the UK the usual market rent practice is a barrier to such necessary communication. With the exception of Greenspan (1987), who describes demographic monitoring, the literature says little about the methods and practice of monitoring retail tenant mix evolution, diagnosing problems and spotting opportunities. The most obvious indicator of the need for tenant mix change is the failure of a retailer. This may result in an unexpected vacancy and a request to assign or sub-let the lease. In a strong retail market the landlord is likely to benefit from re-letting a vacant unit and has no interest in keeping a retailer whose business is not thriving. In a weak market, however, the landlord may protect its income stream by enforcing the retailer s covenant to pay rent until the end of the lease. Tenant mix normally changes incrementally over the life of a centre (Thomson 1999) in response to vacancies on liquidation, at lease termination, by agreement with the landlord or by assignment. Each vacancy presents an opportunity for the landlord to modify the tenant mix within the constraints of the market and the characteristics of the vacant unit (Kirkup and Rafiq 1994). PROACTIVE MANAGEMENT Greenspan (1987) advocates proactive management of tenant mix, rather than relying on changes instigated by retailers. This can involve negotiations for surrender of leases, possibly involving a payment to the retailer. More radically a centre may be wholly or partially refurbished and the tenant mix repositioned towards a changed demographic or competitive environment.

MANAGEMENT STRUCTURES Peters (1990) suggested that tenant mix can evolve organically through the operation of market forces; unsuccessful retailers leave and are replaced by others. Alternatively, the mix can be planned and actively managed. Whereas most commentators assume the centre asset manager is responsible for this process, Peters believes that: "...notwithstanding the centre manager s responsibilities...it is the ultimate responsibility of the retailers in a centre to govern retailer mix. Indeed they are probably the only body...who are fitted to do so." He suggests that tenant associations are well placed to drive tenant mix change, but appears to be alone in this view. Prendergast et al (1996) investigated tenant-manager relationships in New Zealand and found, from a sample of 15 shopping centres, that all the centre managers were located on site or close by. Kirkup and Rafiq (1999) found more complex management structures operating for UK shopping centres. The UK model has up to three layers of management involved in

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MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM

This may also involve the merger or subdivision of units to meet the new retail requirements (Knight Frank 1997). Lettings will normally be at market rents, but Greenspan (1987), Yap (1996) and Bernard (2000) all note instances of higher offers being forgone in order to achieve the desired tenant mix. Greenspan (1987) advocates the gradual evolution of tenant mix, since shoppers are unsettled by instability or failure to find the retailer they expect within a particular centre. Although Bruwer (1997) suggests shopper surveys for designing initial tenant mix, he is alone in doing so. This may be because of suspicions that stated shopping intentions might not be matched by actual shopping behaviour. There are no suggestions in the literature that shopper surveys should be used as a means of monitoring tenant mix success or identifying the need for change. LEASE MANAGEMENT CASE LAW Landlords and their agents have evolved management tools to deal with these circumstances. UK retail leases commonly include clauses requiring the landlord s approval before the lease can be assigned or sub-let and a user clause restricting the types of merchandise that can be sold. These tenant s covenants are the landlord s main means of controlling which retailers trade in the centre and the mix of merchandise on offer. Carvalho and Slessenger (1999) describe three cases in which landlord s tenant mix policies were implemented by means of lease clauses: In Chelsfield MH Investments Ltd v British Gas plc [1995] NPC 169 a gas showroom was prevented from being used to sell electrical appliances. The lease in this case contained a clause that allowed change of use, but not "for such purposes as the landlord may reasonably object to on the grounds of good estate management". The landlord used the clause to prevent competition with an electricity showroom opposite. The landlord of much of Regent Street in London refused consent for a jeweller to assign its lease to a bureau de change and ticket agency on the grounds of its estate management strategy. The decision was upheld by the Court (Crown Estate Commissioners v Signet Group plc [1996] 2 EGLR 200). Perhaps the most significant of the three cases is Moss Bros. Group plc v CSC Properties Ltd [1999] EGLR 47. The lease held by Moss Bros. allowed the sale of clothing or other items approved by the landlord where, in the landlord s reasonable opinion, their sale was "consistent with the principles of good estate management having regard to the particular distribution of trades within the centre". The landlord refused consent for an assignment to a computer games retailer and the change of use involved, since its policy was to concentrate fashion retailers in that part of the centre. The Court decided that there was a tenant mix policy in force, albeit unwritten, and the consent for assignment was

reasonably withheld. Under the Landlord and Tenant Act 1988, the landlord was required to show that it had acted reasonably in refusing consent to assign, in order to prevent the computer game shop from taking the unit with detrimental consequences for the tenant mix. Carvalho and Slessenger (1999) suggest that landlords should make known any tenant mix policy to facilitate using it as grounds for refusal of consent to an assignment. They are not explicit about whether the policy needs to be written, but suggest it needs to be enforced consistently. LEASE LENGTH AND SECURITY During the 1980s UK institutional investors favoured the income security provided by 20 or 25 year leases to strong companies. In the context of shopping centres, this meant letting to strong anchors or national multiple retail companies. In England and Wales, the Landlord and Tenant Act 1954 gives retailers security of tenure at lease expiry, should they choose to remain. As a result, the only opportunities for a landlord to modify tenant mix would be when a retailer failed, or sought to surrender the lease, or by the expensive alternative of buying it out. However, Section 38(4) of the Landlord and Tenant Act 1954 gives the landlord and tenant the opportunity to agree to opt out of the Act s provisions for security of tenure. This allows landlords to increase their control over occupation and thereby the frequency with which tenant mix changes. During the property recession of the 1990s and the ensuing change in office business practices, shorter leases became acceptable to investors in the office and industrial property sectors. The idea was also accepted that accelerating functional obsolescence was more easily remedied where landlords used shorter leases, enabling them to regain control of the building more frequently. Retailers, however, require at least five years security over which to write off the sometimes very substantial costs of fitting out their unit, so that acceptable lease lengths are longer. There is always a balance to be struck between the flexibility that can be provided by short leases, opted out of the 1954 Act, and the desire for an income stream secured well into the future, underpinning the value of the centre as a financial asset.

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MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM

5
Research methodology
The literature review on tenant mix and its management gave rise to a list of preliminary questions to be addressed by the research. In the first instance it was necessary to test these ideas against the practical and expert knowledge of specialists in the field. The primary research therefore commenced with interviews with 15 letting agents and retail asset managers, both in-house and external (see Appendix A). The interviewees were provided in advance with a list of initial questions. The semistructured interviews followed this agenda but interviewees were encouraged to raise additional issues, which they did. The interview responses prompted the questions included in the subsequent questionnaire, which focused the research on the ongoing management of tenant mix an issue sparsely dealt with in the literature. A postal survey was chosen as the most practical means of data collection within the time constraints. The survey was sent in June 2000 to investors and asset managers of 104 UK shopping centres over 25,000 square metres in size. In many cases the centres were managed inhouse, so that there was no distinction between the two groups of respondents. The investors included both institutions and property companies. They were asked to respond only in respect of the named centre. Thirty questionnaires were

returned, all with useful responses. Figure 1 provides a breakdown by overall floorspace of the centres for which responses were received. Appendix B contains a list of the centres. The sizes range from 22,480 to 148,650 square metres (242,000 to 1.6 million square feet), with a median of 32,980 square metres (355,000 square feet). In order to explore possible differences between responses from larger and smaller shopping centres, the sample has been split at the median value. This division is arbitrary, rather than being based on any known functional divide between size groups, but does provide some interesting results. The results of the questionnaire survey were reported to a workshop held at the British Council of Shopping Centres (BCSC) National Conference, Glasgow, in November 2000. Workshop participants were then asked to discuss the issues raised and report their deliberations. The outcomes are reported below. This group of retail specialists was self-selected rather than representative, and may have been individuals with a particular interest in developing tenant mix management practice. The group of 40 people included solicitors, retailers and retail architects, as well as the majority group of retail asset managers. Finally, a copy of the draft report was sent to each interviewee and questionnaire respondent with an invitation to add further comments. These comments were then incorporated into the final report.

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Figure 1: Floorspace of respondent shopping centres

MANAGING TENANT MIX IN SHOPPING CENTRES IN THE UNITED KINGDOM

6
Research results
The results of the questionnaire survey are reported here, supplemented by the interviewees observations and the BCSC workshop reports. Questionnaire respondents were invited to comment on the issues raised and their comments are reported where they add substance to the bare statistics. EVOLVING TENANT MIX Respondents were asked to distinguish between the importance of seven considerations that interviewees had identified as relevant to managing the ongoing evolution of a centre s mix. Figure 2 shows the responses, and highlights the primacy of maintaining effective anchors. This is in accordance with the roles attributed to anchor stores in the literature positioning the centre in relation to its competition, dominating shoppers images of the centre and determining which other retailers can be recruited and retained there. Five other considerations are rated as critical or important by a large majority of respondents. Of these, maximising rental value and responding to current occupier demand are rated only marginally higher in score than positioning against other centres , choosing strong tenant covenants and meeting unmet consumer demand in the catchment area . Theoretically this last consideration should be the most important of the five,

since it is the underlying driver of successful tenant mix, giving rise to ideal competitive positioning and maximising rental income. It is interesting that respondents rate responding to consumer demand less highly than responding to occupier demand , with only half the number considering the former to be critical. Occupier demand impinges very directly on managers, as retailers contact them or their agents, seeking new trading locations. Consumer demand, on the other hand, is not obvious and can only be ascertained through research. It may be that shopping centre managers rely on the detailed demand and supply research carried out by individual retailers in ascertaining the viability of new store locations, rather than themselves analysing the unsatisfied consumer demand in their centre s catchment area. This is essentially a passive rather than an active approach to managing tenant mix, and relies on the retailers expertise, despite the fact that they may have an imperfect understanding of the tenant mix as a whole. Two BCSC workshop groups suggested that landlords should analyse catchment data and pay more attention to demographic changes, in order to tailor tenant mix to consumer demand. They envisaged this information being shared with retailers to ensure that all involved were making decisions based on the best possible information. However, there were reservations about the ability of asset managers to interpret such data without employing retail experts. The benefits of this approach had also to be balanced against its cost, although some might be recoverable from retail tenants.

Reflecting local stores and streets

Smaller centres Larger centres All centres

Strong tenant covenants

Meeting unmet demand

Positioning against other centres

Maximising rental values

Current occupier demand

Maintaining effective anchors

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2.0

2.5

3.0

Average score (0=not applicable 3=critical)

Figure 2: When managing the evolving tenant mix in this shopping centre, what are the most important considerations?

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The fact that responding to occupier and unmet consumer demand is scored comparably to maximising rentals suggests that short-term value maximisation is not widespread. This concurs with comments by Greenspan (1987), Yap (1996) and Bernerd (1999) and was reinforced by some interviewees, who suggested that shareholder pressure for short-term increases in value had to be balanced against medium to long-term rental growth potential arising from a well-chosen tenant mix. However, BCSC workshop groups felt that pressure for shortterm rental growth associated with IPD benchmarking meant that very few risks were taken in leasing and overall performance could be damaged. They suggested that freedom from short-term investment return benchmarking would lead to more imaginative tenant mix and hence performance in the longer term more independent retailers could be included who could afford to locate in shopping centres only if allowed concessionary rents. The low score given to reflecting local stores and streets suggests that managers of in-town centres are more interested in competing with other centres than with the surrounding retail context. There was no difference between the weight given to this issue by managers of large and small centres, despite the fact that more small centres are embedded in town centre retail contexts. Figure 2 shows the differences in response to this question between larger and smaller centres. Only positioning against other centres differs noticeably, being more highly rated for larger centres, perhaps because they compete over large geographical areas.

LOCATION OF STORES As well as the overall balance of retail types within a centre, the second major ingredient of tenant mix is locating each retailer in relation to others and to the centre s layout. Respondents were asked to score issues involved in these micro-location decisions. Figure 3 shows the responses to the eight suggested issues, drawn from the literature and the interviews. Over 80% of respondents rated management of pedestrian flows as either critical or important, prioritising it over other seemingly important issues. The lower scores given to grouping comparison shops, separating incompatible retailers, and separating competing stores, seem at first sight to contradict the importance afforded to these issues in the tenant mix literature. However, this may be because managers rely on the judgement of skilful retailers to select or reject individual locations on these bases and therefore concentrate on the whole centre issues, which are outside the control of individual retailers and for which the manager alone is responsible. Certainly the attribution of the second highest score to good access to catering is in accordance with this whole centre approach. It is also likely that floorspace pricing automatically sorts retailers, rendering the issue of distinguishing primary from secondary malls relatively unimportant. The low importance afforded to creating malls for different shopper profiles suggests that this is a luxury outside the objectives of any but the largest centres; 22% of respondents considered it did not apply to their centre at all. The relatively highly perceived importance of separating incompatible retailers compares surprisingly to the issue of grouping comparison retailers, which receives much attention in the literature and yet is given relatively low importance here.

Separate competing stores Malls for different shopper profiles Group comparison retailers Mall merchandise profiles

Critical Important Minor Not applicable

Distinguish primary from secondary Separate incompatible retailers Good access to catering Manage pedestrian flows

20

40

60

80

100

Percentage of shopping centres Figure 3: When deciding where to locate each retailer within the shopping centre, what are the most important considerations?

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This analysis brings to mind the case Moss Bros. Group plc v CSC Properties Ltd [1999] EGCS 47 and others, where landlords had to defend their comparison retailing cores against unwanted interlopers seeking to feed off the high footfalls generated there. The explanation of this apparent anomaly might then be that comparison retailers recognise their own kind, relieving managers of having to steer them to the appropriate location. Other non-comparison retailers seeking to locate amongst them have to be positively managed into locations that will enable them to thrive without damaging the effectiveness of the centre as a whole. POLICIES FOR MANAGING TENANT MIX Kirkup and Rafiq (1999) remarked on the variety of management structures operating in UK shopping centres. A question aimed at identifying whereabouts in the ownership and management hierarchy the responsibility for tenant mix policy lies could have been better designed. Little more can be inferred from the answers than that there is a hierarchy of influence. On average, in-house asset managers and investors in this sample have more influence than do outsourced asset managers, letting agents and research consultants. Shopping centre managers have marginally less influence than research consultants, and principal retailers and anchor tenants are equal lowest in the hierarchy. These results are unsurprising, except the equal scores of principal retailers and anchor tenants, where the latter might have been expected to wield more influence. This may be a result of the current weakening of traditional anchors such as Marks and Spencer plc, and the growing influence of the main space users. This reinforces the conventional wisdom, rather than the idea forwarded by Peters (1990) that retailers should lead tenant mix management.

Interviewees varied in their responses to the case of Moss Bros. Group plc v CSC Properties Ltd [1999] EGCS 47. One interviewee had subsequently been asked to produce written policies for the tenant mix of several shopping centres, to protect against unwanted assignments. These policies used loosely defined retail categories to avoid a restriction on assignment depressing rental value. Some interviewees had not recorded a tenant mix policy to facilitate a defence against unwanted assignments. Respondents were therefore asked whether the tenant mix policy for their centre was formal or informal, written or unwritten and detailed or outline. Figure 4 shows the responses. If informal/outline/unwritten policies are characterised as being less developed and formal/detailed/written policies are characterised as being more developed, then it is clear that less-developed policies dominate the sample. Only 40% of centres have a written policy and fewer than 30% have a formal one. This would suggest that some centre mixes may be vulnerable to disruption by assignment, or that investors may unnecessarily have to go to some lengths to defend their mix. Figure 4 suggests that less-developed policies are more prevalent in smaller centres. Applying a chi-squared test to the responses shows that the difference between the large and small centres is statistically significant at the 5% level. This means that larger centres are more likely to have a welldeveloped tenant mix policy, with the possible implication that smaller centres mixes are more likely to be vulnerable to disruption by assignment.

Detailed

Smaller centres

Larger centres Formal

Written

Unwritten

Outline

Informal

10

12

14

16

Number of shopping centres Figure 4: Please describe the status of the tenant mix policy

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Asset managers at the BCSC workshop considered articulating and communicating tenant mix policy as largely unimportant, and some believed it could limit flexibility, creating a millstone for managers. Differences in approach between small local centres and large regional or super-regional centres were highlighted by one group who considered sophisticated policy appropriate for the latter but unnecessary for the former. This ties in with the picture of policy development revealed by the sample. Workshop feedback echoed Kirkup and Rafiq (1993) and Peters (1990), who documented the difficulties of managing tenant mix at times of recession, when there is pressure to accept almost any tenant which will pay rent for a hitherto vacant unit. In such circumstances policy was considered almost superfluous. Interestingly, the only group in favour of asset managers communicating a tenant mix policy included several retailers.

These results must be considered in the light of the finding that a fifth of respondents were unaware of the Moss Bros. case, as shown in Figure 5. Figure 6 shows that only 25% of the sample had increased the formality of their policy following the case. MONITORING TENANT MIX EFFECTIVENESS Figure 7 shows the sample s responses to a question about frequency of review of tenant mix policy. Regular policy review occurs in only 47% of the sample, 18% quarterly and 29% annually. Thirty-two per cent of the sample reviewed their policy at unspecified irregular intervals and 21% relied on lettings as the occasion for review. Overall, if regular policy reviews are taken as an indicator of a proactive approach to the issue, this suggests that 53% of managers are reactive. According to Greenspan (1987), tenant mix should be continuously monitored, to diagnose problems and trigger a proactive management response, ensuring that centre competitiveness is maintained. In reality, continuous monitoring

No - 20% Yes - 80%

may not be practical, but monitoring must be both regular and frequent. Interviewees described a continual informal process of conversations between the on-site centre manager and retail unit managers, to gather information, including their sales trends. This is relayed to the asset manager and so contributes to the process of monitoring tenant mix effectiveness. In some cases these meetings were carried out to a regular programme. In addition to this informal information gathering, interviews and the literature suggested four formal methods of monitoring the effectiveness of a centre s tenant mix policy and these were used as a basis for asking respondents about the approach in their centres. Figure 8 shows the outcomes. To ensure effectiveness, any method should be used regularly, whether it is annually, quarterly or monthly. Among the four

Figure 5: Are you familiar with the decision in the case Moss Bros v. CSC Properties?

No - 75% Yes - 25%

Figure 6: Has the centres tenant mix policy become more formal following the Moss Bros case?

methods, regular use is equal lowest for bespoke research and turnover details, usually collected for calculating turnover rents. Less than half the sample regularly used these methods. Of the centres using turnover details, about half do so annually, with only three centres following Greenspan s advice (1987) to monitor turnover weekly or monthly. It should be noted that turnover rents are normal in US centres, but infrequently used in the UK, so that these details are probably unavailable to many of the respondent asset managers. This may explain why nearly half of the sample never used turnover details.

Annually Irregular intervals 27% 23% Quarterly Each letting 20% 30%

Figure 7: How frequently is this shopping centres tenant mix policy reviewed?

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Interviewees described setting turnover rents for only a proportion, for instance 5%, of leases, with market rents for the others. These are often leases to independent retailers, the performance of which is difficult to predict and which are unable to bid competitively against multiples. In these circumstances turnover rents are a practical form of rent concession and monitoring them gives the manager warning of failure. However, in centres where turnover rents are only used for independents, they are an inadequate tool for monitoring tenant mix unless supplemented by other methods. Several centres also use a turnover index, presumably thereby achieving coverage of all retailers performance. This is indeed the most frequently used method, with almost half the sample using it at least every month and nearly two-thirds using it annually or more often. Several interviewees said that retailers are unwilling to reveal details of their turnover, for fear this highly confidential information may leak to competitors. Turnover indexation is a more acceptable alternative, based on retailers reports to the asset manager of turnover variations over time, expressed as percentage changes. Figure 8 shows that this method of monitoring retailers performance was used by about two-thirds of the sample, with almost 50% of managers operating the system at frequencies of between one and four weeks. One interviewee reported that the average result of the exercise was relayed back to tenants to enable them to benchmark their performance against the others in the centre. This system was advocated by several of the BCSC workshop groups as the ideal practice to aim for. However, some expressed doubts that asset managers had sufficient retailing expertise to utilise fully the potential of turnover data.

Two respondents ruled out shopper surveys altogether, and eight carried them out only infrequently. The other two-thirds of the sample carried them out predominantly annually or quarterly. Other bespoke research was carried out in all but four of the sample, but only infrequently in half of these cases. Elsewhere it occurred predominantly on an annual basis. Six centres reported monitoring habits which certainly do not match up to the standard of frequency advocated in the US context by Greenspan (1987). They used a single method only at annual frequency or one or two surveys, annually at best. On the other hand, the remaining 80% of the sample, with two or more methods used at more than annual frequency, would appear to have a good chance of noting the need for tenant mix change. It seems anomalous that only 47% of the sample reviewed their tenant mix policy on a regular basis, whereas 80% regularly collected the data that might indicate a need for policy to change. This suggests that the data collection does not automatically initiate a review of policy, but that review often arises from other stimuli, such as a letting or tenant failure. IMPLEMENTING TENANT MIX POLICY Interviews yielded ten major means of implementing tenant mix policies. Respondents were asked to identify how frequently they used each one, the results being shown in Figure 9. The results show user and alienation clauses to be the principal tools of implementation. However, the literature would suggest that scores should be as high as four for each one.

Never Turnover details Infrequently

Bespoke research

Annually

Quarterly Shopper surveys Monthly

Turnover index

10

15

20

25

30

Number of shopping centres Figure 8: What methods are used in this centre to monitor the effectiveness of tenant mix policy?

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Extend the centre Concessionary rents

Smaller centres

Larger centres Leases of 10 years or less Surrenders without premium Landlords break clauses Move tenants Buy out tenants Amalgamate units Use clauses Alienation clauses All centres

Average scores (never=0, always=4)

Figure 9: How often are the following means used to implement the tenant mix policy in this centre?

Smaller centres Poorly Larger centres Partially All centres

Fairly

Well

Completely

12

Number of shopping centres Figure 10: To what extent has this centres tenant mix been able to keep up to date with modern retail trends?

Nonetheless, this suggests that attention should be paid to Moss Bros. Group plc v CSC Properties Ltd [1999] EGCS 47. Some interviewees used pre-emption in alienation clauses, to regain control of units where retailers wanted to leave. Interviewees agreed that lease lengths were typically fifteen years, and that retailers resist leases any shorter than five years, to enable them to write off fitting-out costs fully. Other interviewees let some units on five-, six- or ten-year terms, especially those taken by independent retailers and caterers with less secure covenants and which do not have a proven track record of successful business. In England and Wales these were also contracted out of security of tenure, to give the landlord flexibility to remove them at lease expiry. However, one managing agent at interview suggested that 99% of shopping centre leases in England and Wales are within the Landlord and Tenant Act 1954. Anchor stores are locked in for longer periods

since their exit would be disastrous to the centre s success. The relatively high frequency of amalgamating units, buying out tenants leases, moving them within the centre and including a landlord s break clause in the leases, suggests a proactive approach by landlords. Nearly all interviewees regarded buying out tenants as the most proactive response to diagnosis of tenant mix problems, and the natural outcome of monitoring the mix. Buyouts could be to replace a failing tenant, to introduce an important destination retailer, and often to amalgamate units to provide the larger unit sizes increasingly required by such retailers (Knight Frank 1998). TENANT MIX OBSOLESCENCE When asked whether their centre s tenant mix had kept up to date with modern retail trends, only 46% were sufficiently confident to answer that it had done so well (34%) or completely (12%). The answers are illustrated in Figure 10.

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Smaller centres Lack of proactive management

Larger centres Lack of investment All centres Lack of retailer demand

Long leases

Lack of vacant units

Inappropriate unit sizes

0.5

1.0

1.5

2.0

2.5

Average score (not applicable=0, critical=3) Figure 11: What factors, if any, have hindered updating the tenant mix in this centre?

Interviewees thought that the pace of retail change had accelerated in recent years. They cited as examples the end to expansion programmes by some anchor stores, the weakened appeal of middle-market fashion provided by national multiples, and the growing importance of destination fashion retailers requiring larger units of 1,000-2,000 square metres. Eighty-two per cent of respondents considered that the current decline in the mid-range fashion market had affected their centre s tenant mix policy, with 11% seeing major changes. The answers shown in Figure 10 appear to recognise that managing tenant mix is challenging in such a context. Overall, less than 50% of respondents thought they had kept up with change well or completely. Managers of larger centres in the sample are almost twice as likely as managers of smaller centres to be confident that they have updated their tenant mix to keep up with retail trends. Similarly, managers of smaller centres are almost twice as likely as managers of larger ones to believe that their centres have only partially succeeded in keeping up with retail change. However, a chi-squared test shows that these differences are not statistically significant at the 5% level. Six factors hindering tenant mix updating were identified from interviews and the literature. Respondents were asked to score them, the results being shown in Figure 11. Few respondents believed that lack of investment and of proactive management had hindered tenant mix updating. The perceived inability to update tenant mix, illustrated in Figure 10, was attributed to other causes. Inappropriate unit sizes were identified as most influential, ranked on average as important. Only one

respondent mentioned splitting units, whereas interviewees agreed that units in older centres are often too small to meet current demand from fashion retailers, as described by Knight Frank (1998). Respondents scored lack of vacant units and long leases equally, as second in importance. The scores attributed to these two causes support the intuitive interpretation, that there are infrequent opportunities for changing the mix when units have been let on long leases. Modern leasing practice, described by interviewees, may in time alleviate this problem. Lack of retailer demand is likely to be a problem in failing centres, whereas lack of vacant units could be seen as a happier difficulty, enjoyed in successful centres where demand is high. It is arguable that lack of appropriately sized units, and of vacant units, could be ameliorated in thriving centres by a combination of proactive management and investment, buying out tenants on long leases to amalgamate units and meet current retailer demand. This solution would only be successful, as interviewees pointed out, if the short-term cost were justified by the contribution to overall footfall, and eventually rental values, of introducing an appropriate destination fashion retailer or other main space user. The unanimity between managers of larger and smaller centres on these factors is perhaps surprising. The only noticeable difference is in their attitudes to the need for more proactive management. However, neither group thought this a significant reason for their tenant mix being less than up to date, and it is a tribute to the self-awareness of some managers that they are prepared to admit to it at all.

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Respondents were asked finally whether they thought the centre s tenant mix would need to change in response to the growth in e-retailing. 30% foresaw no need for change, 70% considered it should be only minor and none expected major change. Several qualified their responses by limiting them to the short-term, reserving judgement over a longer time frame. Comments indicated that some retail sectors were believed to be more vulnerable than others, notably books and CDs.

7
Summary and conclusions
SUMMARY The success of any new shopping centre depends on the initial tenant mix, which is dominated by the choice of anchor tenants. The positioning of the centre in relation to its competition, its attraction to shoppers and its potential for drawing repeat patronage are all strongly influenced by the tenant mix. Retailing in the UK is undergoing significant changes, which are a challenge to retail asset managers and have the potential to render obsolete the tenant mix in many centres. Eighty per cent of respondents thought their tenant mix policy had been affected by the decline in the mid-range fashion market. The research shows that many participants in the centre management hierarchy are involved in meeting this challenge, but that in 20% of the sample there was doubt that they had succeeded fully. In a majority of cases the policy was informal, undetailed and unwritten, despite the need, highlighted in Moss Bros. Group plc v CSC Properties Ltd [1999] EGCS 47, to establish a policy as a defence against possible assignments. It is interesting that the asset managers felt able to assess the success of their tenant mix policy, despite its nebulous nature; that nearly 20% were unaware of the Moss Bros. case; and that only 25% had since increased the formality of the policy. The importance of maintaining anchor stores is recognised by asset managers, as it is in the literature. Short-term income maximisation appears to be balanced against the need to plan a tenant mix which will add to asset value in the medium to long term. Management of pedestrian flows is perceived as the main objective when locating retailers in a centre, and considerations relating to comparison clusters, lifestyle and merchandise appear to be seen as less important, perhaps because these are perceived to be automatically managed by the retailers choices of affordable and suitable pitch. Turnover indices and shopper surveys are the main methods used to monitor the success of tenant mix policy. In a small minority of cases monitoring appears to be both irregular and infrequent, but 80% of the sample appear to have a good chance of noting the need for tenant mix change with two or more methods used at more than annual frequency.

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Policy review appears to be more irregular and often depends on stimuli such as tenant change. Despite the suggestion that some asset managers could be more proactive, the incidence of tenant buyouts, amalgamation of units, moving tenants and operating landlords break clauses suggests that many are energetically adjusting their tenant mix to respond to changing retail circumstances. The main hindrances are perceived to be inappropriate unit sizes, lack of vacant units and long leases. Lack of investment and of proactive management are not considered to be a problem, although arguably a combination of investment and proactive management could overcome the problems that were identified. It is not possible to ascertain from this type of study the degree to which asset managers are succeeding in managing tenant mix in a period of rapid and significant change in retailing. The study does, however, provide an overview of the objectives and methods of tenant mix management that asset managers can use in assessing their own effectiveness. A larger sample might have provided opportunities for better differentiating practice between different types of centres, which was suggested by interviewees. Resource-consuming methods may not be considered a worthwhile investment when the potential for increasing value is limited by size and catchment. THE FUTURE DIRECTION OF TENANT MIX MANAGEMENT Tenant mix determines the success of centres as shopping destinations, so tenant mix management is fundamentally important to shopping centres. The traditional property asset approach to shopping centres tends to be remote from the customers who are the centre s lifeblood. It is also too conservative. Shopping centres would be more effectively managed as retail businesses, based on the marketing concept of business. To achieve this, centres need to be more in touch with: national consumer trends national retailer trends consumers and trends in the catchment area shoppers visiting the centre tenants in the centre

To avoid creeping tenant mix obsolescence, management needs to become more proactive, responsive and flexible. To achieve this, centres should have: an ongoing programme of monitoring key sources of information an explicit direction, though subject to review, based on thorough research a marketing strategy with priority targets and a clear message a greater willingness to risk investment tactically to achieve higher returns a conscious programme of annual improvement

Shopping centre management needs to evolve away from the negative battle of landlord versus tenant, towards more modern and positive forms of partnership. Initiatives to achieve this could include: more openness between the parties, based on shared goals pooling of research on the catchment area more frequent opting out of the Landlord and Tenant Act 1954 (England and Wales) shorter lease lengths more use of turnover rents an understanding that underperforming retailers will be assisted, but must leave if they cannot improve

FUTURE RESEARCH In order to move towards this vision of shopping centre management with its potential for tenant mix improvement, research is needed into the feasibility of the following areas: A large amount of data is collected and relied on by retailers and centre asset managers. How can this be assembled and managed collectively, cutting out duplication and contributing to a shared understanding of the trading context of a centre, in order to facilitate continual tenant mix updating? What constitutes a marketing strategy for a shopping centre and its tenants? How should such a strategy be formulated and implemented? How can centres make the transition from a traditional long lease/security of tenure pattern of lettings, to a more flexible and responsive business approach, which could provide the context for evolving an optimum merchandise mix?

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Bibliography

Abratt R, Fourie J L C & Pitt L F (1985) Tenant mix: the key to a successful shopping centre, Quarterly Review of Marketing, Spring 1985:19-26 Bernerd E (1999) Chairman s statement: Chelsfield plc Annual report and accounts 1999, London: Chelsfield plc Bloch P, Ridgway N & Dawson S (1994) The shopping mall as consumer habitat, Journal of Retailing, 70:29-38 Brown D (2000) Top of the shops, Estates Gazette, 15 April 2000 Brown S (1993) Micro-scale retail location: Cinderella or ugly sister? International Journal of Retail and Distribution Management, 21(7):10-19 Bruwer J de W (1997) Solving the ideal tenant mix puzzle for a proposed shopping centre: a practical research methodology, Property Management, 15(3) CALUS (1975) Rent assessment and tenant mix in planned shopping centres, Reading: Centre for Advanced Land Use Studies Carvalho C & Slessenger E (1999) Getting the right mix, Estates Gazette, 21 August 1999 Court Y (2000) Sales performance: shopping centre progress 1999-2000, London: Estates Gazette Darden W R & Babin B J (1994) Exploring the concept of affective quality: expanding the concept of retail personality, Journal of Business Research, 29:101-109 Finn A & Louviere J J (1996) Shopping centre image, consideration and choice: anchor store contribution, Journal of Business Research, 35:241-251 French H (2000) The role of independent traders in shopping centres, Unpublished Undergraduate Dissertation, University of Northumbria, Newcastle Upon Tyne Greenspan J (1987) Solving the tenant mix puzzle in your shopping centre, Journal of Property Management, 53(4):27-31 Hillier Parker (1997) The national survey of local shopping patterns, reported in Teale M (1997) Tracking the consumer, Estates Gazette, 1 March 1997 Kaylin S O (1973) In depth analysis necessary for shopping centre game, Shopping Centre World, August 1973, 46

Kirkup M H & Rafiq M (1994) Managing tenant mix in new shopping centres, International Journal of Retail and Distribution Management, 22(6) Kirkup M H & Rafiq M (1999) Marketing shopping centres: challenges in the UK context, Journal of Marketing Practice: Applied Marketing Science, 5(5):119-133 Knight Frank (1998) Retail review, Summer 1998, London: Knight Frank McGoldrick P J (1990) Retail marketing, London: McGrawHill Northern I & Leonard J (1977) Planning for people, Reading: CALUS O Roarty B, McGreal S and Adair A (1997) The impact of retailers store selection criteria on the estimation of retail rents, Journal of Property Valuation and Investment, 15(2):119-130 Oswald A (1999) Review the possibilities, Estates Gazette, 18 September 1999 Peters J (1990) Managing shopping centre retailer mix: some considerations for retailers, International Journal of Retail and Distribution Management, 18(1):5-7 Prendergast G, Marr N & Jarratt B (1996) An exploratory study of tenant-manager relationships in New Zealand s managed shopping centres, International Journal of Retail and Distribution Management, 24(9) Reidenbach R E, Cooper M B & Harrison M C (1984) A factor analytic comparison of outshopping behavior in larger retail trade areas, Journal of the Academy of Marketing Science, Spring 1984, 12(2):145-158 Roberts J & Melvin J (1999) Clear Bluewater, Estates Gazette, 27 February 1999 Shim S & Eastlick M A (1998) The hierarchical influence of personal values on mall shopping attitude and behaviour, Journal of Retailing, 74(1):139-161 Steventon K & Wood T (2000) The balance is tipped, Shopping Centre Progress 1999-2000, London: Estates Gazette Stoltman J J, Gentry J W & Anglin K A (1991) Shopping choices: the case of mall choice, Advances in Consumer Research, 18:434-440

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Bibliography

Teale M (1997) Tracking the consumer, Estates Gazette, 1 March 1997 Thomson C (1999) Measuring the changing pattern of tenant mix in Eldon Square, Newcastle upon Tyne, Unpublished dissertation, University of Northumbria Titus P A & Everett P B (1995) The consumer retail search process: a conceptual model and research agenda, Journal of the Academy of Marketing Science, 23(2):106-119 Wakefield K L & Baker J (1998) Excitement at the mall, Journal of Retailing, 74(4):515 Yap C (1996) Retailing and the retail space market in Singapore, International Journal of Retail and Distribution Management, 24(8):17-24

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Appendix A

Appendix B

LIST OF INTERVIEWEES Jenefer Greenwood Graham Chase Kay Chaldecott Jerry Winter Mark Williams Sarah-Jane Curtis John Strachan Yvonne Court Justin Taylor Keith Redshaw Ian Pearson Paul Cawood Keith Stone Rob Wingrave Gordon Gabbani Bob Fletcher CB Hillier Parker Chase and Partners Capital Shopping Centres Churston Heard DTZ Debenham Tie Leung Grosvenor Estate Healey and Baker Healey and Baker Healey and Baker Land Securities Lamb and Edge Lambert Smith Hampton Lendlease Lunson Mitchenall MEPC Sanderson Townend & Gilbert

SHOPPING CENTRES THAT RESPONDED TO THE SURVEY Arndale Centre, Eastbourne Arndale Centre, Wandsworth, London Blackburn Centre, Blackburn Bluewater, Dartford Brent Cross, London Broadmarsh Centre, Nottingham Buchanan Galleries, Glasgow Buttermarket, Ipswich Castle Mall, Norwich Churchill Square, Brighton Cleveland Centre, Middlesbrough Eastgate Centre, Gloucester Ellesmere Centre, Manchester Elmsleigh Centre, Elmsleigh Frenchgate, Doncaster Harvey Centre, Harlow Kirkgate Centre, Bradford Market Place, Bolton Marlowes, Hemel Hempstead Meadowhall, Sheffield One Stop, Perry Bar Priory Meadow, Hastings Spindles, Oldham St Enochs Centre, Glasgow Swan Walk, Horsham Telford Centre, Telford The Fort, Birmingham The Malls, Basingstoke The Walks, Basingstoke Whiteleys, London

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