Understanding Shopping Centers - a Lender's Perspective
The value of the retail shopping property lies in the retailer's capability to generate sufficient sales to spend rent and make a profit. Some retailers generate low sales per square foot of retail space but operate successfully on extremely high profit margins. Other people, such as food stores, operate on extremely low profit margins but have tremendous turnover in merchandise, so the volume of sales tends to make up for the minimal profit margin. The retail shopping center is an important point of get in touch with between each type of retailer and the purchasing public. The retailer's achievement determines the success of the shopping center, and the center's capability to draw the correct mix of the buying public spells success or failure for the retailer. An evaluation of retail sales facilities must concentrate on information about shopping patterns, the economics of retailing, traffic flow, and retail design.
The term shopping center is utilized here, as defined by the Urban Land Institute, to designate "a group of commercial establishments planned, developed, owned, and managed as a unit associated to location, size, and types of shops to the trade area to which the unit serves." Shopping centers are often classified by the market region they serve--area, neighborhood, or neighborhood. As a outcome of current trends toward specialization in retailing, however, shopping centers might also be classified by the kind of shopping offered in the center. For instance, specialty centers might provide higher-fashion or higher-tech shopping, whilst discount or outlet centers offer continuous discounting in all shops.
A lender's analysis of the shopping center operation and expenses frequently focuses on the design of the center and the place of tenants within the center. For effective operation of a shopping center, it is not sufficient simply to fill a center with tenants and offer their wares to the public. Leasing retail property demands understanding of products, customers, and the relationship in between them. If the retailers, architect, leasing agent, and developer cooperate closely, the retailers can gain the maximum possible exposure to the correct customer mix at the most reasonable price to the developer and at a reasonable operating expense for every. The rest is up to the buying public.
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