One cannot overemphasise the significance of new operating models in the dynamic world of retail space. The trends are shifting: the concept of anchor tenants is challenged, new tenants are often looking for flexible space solutions, and customers tend to interact with brands in a different, broader way. In terms of property management, reconsidering time-tested leasing processes may create new profitable opportunities.
With the growing share of online retail and changing role of brick and mortar stores, major tenants tend to move out, prompting landlords to employ innovative approaches in space management. To secure healthy footfall, one might consider splitting an anchor tenant space into a few smaller ones and leasing them out to several smaller companies. Another way is utilising of common areas, commercial spaces, pop-up formats and the like. The viable way to approach those concepts is to apply the principles of flexible space.
One aspect of flexible space in property management is leasing out of any space that tenants can book for a short term.
In broader terms, flexible space may involve optimisation of the signing process, white-box solutions (space with minimal renovation required to move in), and a fresh marketing approach. Potential flexible space tenants usually want to test the physical space concept for a couple days or months before signing a several-year contract.
Implementing flexible space requires an inventive approach to leasing and readiness to adapt from landlords. As to benefits from undergoing it, let’s dive in and discuss the 3 main reasons to consider flexible space today.
Companies that are new to physical retail are looking for flexible space
The E-commerce sector is capturing a rising share of the retail market, as online stores challenge the relevance of physical shopping. Pandemic also did not add excitement to spending time in malls or on high streets. Yet, brick and mortar stores still comprise the vast majority of retail, reportedly show growth in sales, and are recognised as the cornerstone of consumers’ brand journey.
New physical stores not only generate in-store sales but invigorate brand awareness and drive online traffic, increasing it by 52% on average from surrounding postal areas. There is a generational consensus on the topic, too. Both Millennials and Generation Z prefer physical stores over online shopping.
The increasing number of e-commerce businesses consider physical retail for its marketing capabilities and a possible new mode of operation. However, most potential tenants from the online sector won’t enter a leasing contract for several years. A few months’ signing process and the need for expensive renovation don’t help either. 89% of owners in the UK have flexed rental support on a case by case basis (Colliers retail survey 2020).
The key here is the property management’s capability to provide flexible space options. If the tenant can book a space in 30 minutes, instantly move in, and start selling, they are more likely to consider the opportunity. Flexible space is also the necessary condition for trending pop-up shop deals, roughly one-third of which turn into a long-term leasing relationship for the landlord, according to the Cushman & Wakefield report.
All in all, flexible space is a great way to discover potential new partners from E-commerce.
Flexible space is a viable alternative to the anchor tenant concept
For the last few years, property management has been experiencing a demand for shifting from a retail-centred approach. Today’s customer wants to see commercial space not only as means to stock up but as a centre of interest with entertainment and wellness capacities.
At the same time, major players tend to move out from lease spaces, creating a vacuum in the key areas of shopping malls. Instead of searching for a new anchor tenant, owners often choose to reconsider the concept and employ the principles of flexible space, tapping into the market of new exciting tenants.
Such tenants to share major retail space may include:
- New sectors such as food companies
- New types of companies such as non-retail brands
- New formats such as pop-ups or entertainment
- New retail concepts such as shop-in-shops
79% of owners anticipate permanent changes to the industry (Colliers retail survey 2020)
Naturally accessible, shopping malls and high streets are becoming the change drivers of people’s interaction with retail space.
Picture the shopping mall as a major centre of interest, rediscovered by communities from all walks of life that meet, shop and spend quality time there. New tenants pop up every few months, rekindling interest in your space and securing constant footfall.
One example of the fresh approach is Lock29 in Castle Quay Shopping Centre (Banbury, Great Britain). The center has redeveloped the former anchor tenant’s 1,600 m2 space into a flexible concept with the focus on the food sector. Resulting space hosts new exciting tenants, pop-up events, workshops and local talents all the time, creating the atmosphere of everlasting novelty.
A well-known flexible space tenant is Volvo’s electromotive company Polestar, which revolutionised car retail by creating experience-focused spaces in shopping malls and other customer touchpoints worldwide. A recent case of successful short-term leasing is Polestar’s pop-up showroom, which operated for about three months, driving footfall to the Westside Shopping Center in Bern, Switzerland.
As we see from examples, flexible space tenants may be a great solution to utilise vast leasing areas when an anchor tenant moves out. Pop-up concepts create novelty, drive interest to your property, and increase its value on the leasing market.
Optimise the workflow by offering flexible space
Flexible space is a digital transformation trend. To successfully utilise it as an owner, you need a straightforward process for tenants at every step, from pitching to signing a contract. The key touchpoint is your capability to offer rent as short as a couple of days, weeks or months.
It is restrictive for typical flexible space tenants to go through the standard signing process. They are willing to book space on the shortest notice possible, move in, and see how things go from there. Ideally, they prefer to keep it digital, choosing a property and requesting lease conditions within a dedicated platform.
The benefit of employing flexible space is your team’s capability to work more efficiently, leasing out to more tenants, once the process is properly set up. Also, with simplified property management, you will be able to redirect resources into actual business development.
Flexible space is not complicated. The key points for an owner to implement are:
- short-term rental options
- speeding up of a booking process
- fine-tuned marketing
- readily available (white box) spaces
The right set of digital tools can get you going with minimal time and resources investment. Spacewise offers a platform that covers all of the above, providing you with the tools for every step of the leasing process. We offer marketing capabilities, a dedicated marketplace, and a booking engine, all tuned up for convenient flexible space employment.