With the current economic uncertainty, it is more important than ever for shopping center owners to be proactive and engaged. In Southern California’s Inland Empire retail market—where Progressive Real Estate Partners primarily focuses its efforts—we have experienced four quarters of negative net absorption for the first time in 20 years and that is BEFORE factoring in concerns about the effects of tariffs, immigration, and other changes resulting from government actions.
In this blog, I share with you my observations of how successful shopping center owners have handled previous turbulent times to keep their properties more resilient and well-positioned for the long-term.
1. Be Proactive, Not Reactive
Seek to find out if a tenant is going to have a problem instead of assuming everything is fine. Visit the stores and observe traffic, staffing, inventory levels, the condition of the interior, etc. For example, Rite Aid is really struggling right now. Walk into just about any of their stores in Southern California and you will see very little inventory and other signs of trouble. If you have a relationship with a brokerage like ours that utilizes Placer.ai to track foot traffic, ask if they can run a report on a specific tenant to provide insights.
If a tenant’s lease is nearing expiration, be sure to pay attention to when they are obligated to exercise any options. In this market, you’ll likely want them to renew. Notify them in writing of their upcoming renewal option and provide an acknowledgement for them to sign confirming their intent to exercise the option. If they don’t sign, you know it is likely time to address the possibility of non-renewal and the potential vacancy. The sooner you know the better you’ll be able to be proactive about finding a new tenant.
2. Focus on the Fundamentals
Are your vendors doing their job? Is the parking lot clean? Is landscaping attractive? Are all your common area and parking lot lights working? Does your parking lot need a slurry seal and striping? Are the trees trimmed? Are your roofs free of leaks? Are your trash enclosures safe and secure? Do your buildings need painting? Are you addressing any homelessness or vagrancy at your property?
Your tenants have enough to worry about when trying to successfully run their businesses. Give them a pleasant place to do business and hopefully they will succeed and keep paying rent.
3. Invest Some Non-Triple Net Funds into the Property
I’m often surprised by how many shopping center owners think that when leases are triple net that EVERY expense needs to be passed through to the tenants. Although the tenant may be obligated to reimburse the owner for common area expenses, there is nothing stopping an owner from personally taking a few thousand dollars out of their pocket to improve the property without charging it back. If you choose to do this, be sure to let the tenants know that you are absorbing the expense to gain some goodwill. For example, you might elect to remove OR add trees to make your property more attractive and/or enhance visibility. If the tenants see this work going on, some might be concerned that they are going to get a larger triple net invoice. But if they know the ownership is covering the expenses it can strengthen the relationship and ease any concerns.
Bottom line, owners are often much better off investing some funds of their own to enhance their property and NOT pass it through to the tenant. The alternative in many cases is they can’t raise rents because tenants are struggling and part of that is because customers don’t choose to visit the property due to its condition. Or worse yet, the owner loses a lot of income because tenants move out and vacancies rise which might have been avoided by making the property a safer and more welcoming place.
4. Review the Tenant Mix
During economic turbulence, it’s tempting to fill a vacancy with any paying tenant. But short-term leases with weak concepts can become long-term headaches. Take a moment to reassess what your center needs: Does it have too many food operators? Is there a lack of personal services? Should you add an experiential or medical use?
Resisting the quick fix can be difficult, but strategic leasing decisions now will define the center’s success in five years. Clearly you can’t be too picky in challenging times but it’s important to find a good balance. If the tenant’s use is a good one, take the risk, but if it is a poor use and the tenant is not financially viable, save yourself the headaches.
5. Revisit Financing and Cost Structures
Interest rates may not be favorable, but that doesn’t mean you’re out of options. Speak with a quality loan/mortgage broker to explore refinancing. Do this early! There are plenty of unique lenders out there in the market that most owners do not know. Give yourself plenty of time to shop the market and get the best financing for your needs. Reevaluate your insurance premiums and property tax assessments. Shop service contracts. Often, there are opportunities to reduce costs that don’t require large sacrifices — only attention.
This kind of financial stewardship not only protects net operating income but brings a sense of control in an environment where many other factors feel outside of it.
6. Promote Your Property with Social Media
This idea may be ineffective for smaller shopping centers, but with costs coming down for social media managers, it might be more economical than you think to find someone to help with social media for your property. Go online and look for a social media manager near your property who can help promote your tenants within the community. In researching this blog, I came across this potentially cost-effective way of hiring someone to help your property with social media: www.studentmarketing.agency. If any readers decide to use this service, I would love the feedback. Also, another idea to consider is geocoding. Geocoding allows you to capture all the people who either come to your property or to properties immediately surrounding you and then you can promote your center directly to this audience. Once again, if you have success with this idea, let me know.
7. Keep Your Eyes on the Horizon
In volatile times, it’s easy to become overwhelmed by the present. But successful shopping center owners think longer term. They watch demographic shifts, follow retail trends, and remain open to new ideas — whether that means adding EV chargers, improving their tenant mix or even exploring major renovations.
Final Thought
There’s no question these are complicated times. But shopping center ownership has always been about resilience. If you feel like things are harder than they used to be, you’re not imagining it. Yet it’s also true that thoughtful, hands-on management in a challenging market can yield rewarding results, especially over the longer term.
At Progressive Real Estate Partners, we enjoy collaborating with owners to think through some of these ideas with the ultimate objective of enhancing your property. We look forward to working with you and helping you accomplish your goals.