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8/8/2019 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
2. Leasing strategy for a new shopping centre
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2. Leasing strategy for a new shopping centre
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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2. Leasing strategy for a new shopping centre
Tenant Mix
by categories
by location
by size
by price
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2. Leasing strategy for a new shopping centre
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
2. Leasing strategy for a new shopping centre
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2. Leasing strategy for a new shopping centre
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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2. Leasing strategy for a new shopping centre
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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2. Leasing strategy for a new shopping centre
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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2. Leasing strategy for a new shopping centre
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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3.1 Tenancy Agreement
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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3.1 Tenancy Agreement
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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3.1 Tenancy Agreement
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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3.4 Interesting tips for ShoppingC
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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3.4 Interesting tips for ShoppingC
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!