Before the pandemic, the growth of online shopping had already hit retail centers’ revenues. Many of the stores had been struggling to stay open. And some shut down for good. In doing so, it left retail property managers with vacancies that do not reflect well on the property. Of course, it also hurt their net operating income.
Then COVID-19 changed everything. The U.S. saw a record number of store closings in 2020. A Fool.com article
says the average retail vacancy rate reached 8 percent in 2020. The good news is that Fool expects the retail vacancy rate to drop to 7.5 percent this year. It’s believed that commercial real estate will noticeably recover from the pandemic in 2021.
Of course, the recovery rate depends on various factors. For one, the availability of the vaccines. Secondly, it will depend on the government stimulus for businesses. All in all, the turnaround is likely not to occur before summer.
On the flip side, retail properties hosting big-box retailers, pharmacies, healthcare, and groceries, have held up as these are essential businesses. Any retail property that’s stressed by the vacancies may want to pivot and convert those empty spaces, parking lots, and undeveloped land into new opportunities.
But first, here’s a look at why retail centers need to minimize vacancies.
The Problem with Vacant Retail Centers
Many things can happen to a vacant commercial property. One of the biggest problems is unwanted visitors. An empty or almost empty retail center is an invitation for the homeless, rowdy people, squatters, and criminals.
An empty parking lot will tempt a few daredevils to race cars and do donuts. They burn rubber leaving marks all over the parking lot. Or they may turn the parking lot into a party zone or break into one of the empty stores.
Some of the suites may be empty, but criminals find things to steal such as copper, HVAC units, piping, and other fixtures. The homeless and squatters turn empty spaces into their new home. These kinds of places can also attract drug dealers and users. Once any of these happens, it’s going to be difficult to find new tenants.
Additionally, some threats are not caused by humans. For instance, during the cold winter months, frozen pipes and hot water heaters can burst. The longer the flooding goes undetected, the more it will cost to repair the damage.
Companies like Stealth offer live video monitoring. Security operators can watch surveillance cameras in real time. As soon as the monitoring operator sees unusual activity, he or she can immediately contact the proper authorities to minimize any damage at your property.
Converting Retail Centers into Short-Term Opportunities
The pandemic will end. It’s a matter of when. Once it does, retail will pick up. In the meantime, retail centers need to adapt to find a way to fill the space, collect rent, and avoid having empty spaces that could hurt aesthetics.
Some property managers have gotten creative with their empty spaces and open land. They open pop-up shops. These are short-term retail stores that fill in vacancies. You’ve probably seen Halloween pop-up shops
open for the month of October. For the months of November and December, you’ll see stores selling Christmas items.
These give property managers a way to fill the empty space without making permanent changes. You don’t have to wait for the fall and winter holidays to add pop-up shops. There are plenty of year-round options.
Popular pop-up stores include clothing, donuts, and handbags. These businesses don’t require configuration changes. Just invite them and they’ll take care of everything else. Month-to-month leases for these businesses tend to be lower than a traditional lease. They’re smaller businesses that may not make as much money as a permanent store.
After all, less rent always beats none. Besides, these places keep the retail center looking busy. No one feels safe venturing to barren retail centers. Your other tenants will appreciate it when all the stores are occupied.
Another option is to add food trucks. If you invite a regular lineup of food trucks and promote this, you may turn it into a win-win opportunity for food truck owners, customers, and your retail center. Since people rarely dine out during the pandemic, food trucks offer a perfect solution. They allow people to pick up food safely and try new things.
Consider creating theme days or weeks. For example, you could create red, white, and blue week in July. During the week, any customer showing up in red, white, or blue would get a discount. Ask the food truck owners for ideas for discounts and themes. They’ll feel more empowered and will want to stick around.
Have you heard about the Hello Kitty Café truck? It travels all around the U.S. and there are always long lines. They sell treats, clothes, and knickknacks. Ask around. You may find some similar trucks that are a big draw. Of course, make sure everyone follows social distancing guidelines.
Repurposing Retail Center Stores
Some properties can increase their net operating income by giving their retail center a new lease on life. They can do this by converting their property to serve a different type of business. Some have repurposed their properties to something wholly different:
Yes, congregations have made a home in retail centers. They’re showing up in places that you’d never expect. Churches have leases in more than 100 malls and open-air retail centers according to the Wall Street Journal. Furthermore, Business Insider says many congregations and churches thrive in retail locations.
The best properties are free-standing spaces that would work as a big-box store and they’re located near population centers. Prospective tenants look for a place like this because of their plentiful parking spaces, overhead doors, and clear heights needed for industrial use.
Another option is to repurpose space for remote working. As the pandemic slows down, people may not have to go back to their offices, but some may not want to work from home either. The ultimate compromise is a coworking space. This is a property that’s just like an office except you rent a desk or a small office instead of the whole building.
If you take this route, you’ll want to keep social distancing in mind as you create conference rooms and small meeting rooms. You can provide a menu of amenities to allow people to pick and choose what they need.
Enhancing a Retail Center for Dining and Delivery
The pandemic largely affected the restaurant industry. Mainstays have closed their doors after decades in business. Others have evolved to optimize their business for pickup and delivery. Smart retail property managers have implemented technology such as mobile apps and other virtual marketplaces to support one-stop ordering and pickup-up service.
Some retail centers have set up designated areas for picking up orders. They have created sections with numbers or the restaurant’s names. The customer would pull into the designated parking spot and someone brings out the order. The advantage of this approach is that it brings cars into the parking lot and that always helps business and safety.
Protect Your Retail Center Property
Video surveillance helps maximize security while delivering the biggest bang for your dollars. The appearance of video cameras helps deter crime. They can even help mitigate liability issues.
Places of worship especially appreciate video surveillance for security. With many congregations and churches being attacked, they want extra protection.
Other than averting crime, video surveillance systems also help to:
- Reduce damage
- Potentially save on insurance premiums
- Track the number of people in the building
- Reduce costly guard expenses
You can enhance security by integrating an access control system with video surveillance. An access control system gives people a contactless way to enter the building. It can also control what parts of the building they can and cannot enter.
How do you make sure you implement the right video surveillance system? This article will help you choose the right video surveillance service. It provides a checklist of questions to ask video surveillance companies.
There is no such thing as one-size-fits-all in video surveillance. Every business has different requirements based on the property, location, and industry. Be sure to select a company that has experience with yours.
Whether your property is partially or fully occupied, security remains an important part of a retail center’s success. Tenants want their employees and visitors to feel safe. To learn more about your options, download your free guide to retail center security or contact us.