How to Gain More Visibility and Flexibility With Your Retail Real Estate Management

After weathering the pandemic and inflation, retailers have good reason to approach expansion opportunities cautiously. However, not expanding — with high costs eroding profits — could be equally risky. There’s a balanced approach that retailers need to seek, one that not only addresses risk, but also promotes growth.

Retailers need a strong real estate management strategythat provides the foundation to make the best decisions in today’s business environment. Specifically, retailers need a strong lease management strategy to help create that foundation to propel them forward.

Retail Real Estate Investment Is Performing Strongly

Retail has been a bright spot in commercial real estate. As distributed work continues and COVID-19 subsides, consumers are looking for ways to reconnect. Shopping, dining, and other experiences with friends and family in local neighborhoods are clear outlets for this need. Retailers who understand this have shifted their real estate management strategy to accommodate this change in consumer behavior. Retailers should strongly consider modeling this approach and expanding into this domain, as it is proving to be resilient and profitable.

This success is playing out on the national stage. Retailers offering personalized, high-value experiences are succeeding; seven consecutive quarters showed positive retail real estate demand, according to an October 2022 analysis. So, retailers should feel confident that if they can provide the right value, they are making strong bets for their futures. However, enacting this shift requires strong organizational practices and disciplined project management.

A Single Source of Truth Is Critical for Retail Real Estate Success

Personalized experiences and retailtainment are the future of retail real estate. People want to invest their time in places that provide exceptional experiences. Brick-and-mortar locations are more than just about location and square footage costs. Designing an incredible experiential space needs to be a first-order priority. Because of the complexities in this expanding and shifting field, excellent lease and project management software is vital from start to finish on the project.

Commercial real estate automation has never been more important. In the shifting marketplace, retailers need to be nimble to succeed. This means having critical information such as move-in dates, tenant improvement allowances, utility payment responsibilities, option rights, and rent escalation clauses available within a few clicks if an opportunity quickly presents itself. Once a lease is signed, it’s critical to keep the project moving on the proper timeline to get the store constructed to the exact specifications necessary to give the right customer experience. Having all the critical dates, lease data, clauses, and build-out timelines stored in a central, stable access point will keep all project stakeholders aligned and moving forward. It’s important everyone works from the same understanding to avoid delays and twin detriments of construction costs and lost profits.

Having a centralized, dependable data source will provide reliable information for lease needs quickly while also keeping internal parties on a good track for project management. Additionally, there are several other key ways a lease management system can help with business flexibility to take advantage of the current market:

1. Lease management helps with financial forecasting

Business leaders first review their profit and loss statements to look for areas to optimize. Real estate leases are usually an organization’s second-largest expense beyond payroll, so this is a particularly important area to track. With rent escalation clauses and expense adjustments tied to the consumer price index posing increasing threats in a high-interest rate and high-expense environment, your real estate leases could have ticking time bombs that are not being tracked. Lease management software that allows for commercial real estate automation is a key defense to make sure expenses are tracked accurately.

2. Lease management helps with critical date management

A strongreal estate management strategyrequires surgical precision in tracking critical dates. Every lease has dozens of essential dates. Multiply that by a lease portfolio of 50, and your team is easily tracking hundreds of critical dates. There are enormous financial and operational implications if you miss those dates. For example, if your lease auto-renews, then you might be locked into another five-year lease that doesn’t serve your business. Having a single automated source of truth that notifies you of upcoming and vital dates is critical to navigating a retail real estate strategy amidst economic uncertainty.

3. Lease management helps with lease accounting compliance

The Financial Accounting Standards Board (or FASB) instituted a new lease accounting guideline called ASC 842. With ASC 842 impacting every private, public, and nonprofit organization, complying with these new lease accounting standards is top of mind for every accounting team.

Retailers who move quickly to capitalize on the strong retail real estate market will be rewarded. However, that aggression must be channeled through disciplined underwriting and project management to succeed. Using lease management software from the beginning to the end of the business cycle will help retailers drive their businesses forward and position themselves for success.

Andrew Flint is a co-founder at Occupier, a transaction and portfolio management software helping commercial tenants and brokers manage their real estate footprint. Occupier’s software helps teams make smarter, more informed lease decisions by centralizing the way they work. In turn, teams ensure alignment between their real estate decisions and business successes. Andrew has a wide breadth of experience in the sales and commercial real estate spheres and is currently based in New York City.