Shopping Center Operating Costs

When you efficiently manage a Shopping Center, the spending and operational costs have to be well under control. In this property market there are a number of pressures to balance as part of that property management process, and the spending will always be of great concern. It is very difficult to lease vacant premises to new tenants if the outgoings are excessive for a property of its type. The landlord will also have a lower net income if that is the case.

Most importantly the Shopping Center should be performing financially to standards which are at least equal to or better than any other competition properties in the area of ​​similar type and size. The standards should include key financial criteria such as:

  • Repairs and Maintenance costs
  • Insurances
  • Essential Maintenance Services
  • Income generation
  • Vacancy factor
  • Income growth
  • Sales MAT (Mean Average Turnover)
  • Sales per retailer type
  • Sales per shop size
  • Customer visits to the property
  • Council rates and other statutory costs

These figures should be managed and understood within the Shopping Center financial performance plan. To achieve this it is not uncommon for Shopping Center's to share some information and averages as part of market research into financial performance. If you cannot compare your property to something else then you will not know where it is headed and how it is performing.

It should be said that the history of your property over the last few years will always be useful as a benchmark in your property performance plan. As part of that historic analysis, you can split the outgoings between controllable items and uncontrollable items, and then track the escalations by income codes or types.

The uncontrollable items are those that are applied to the property and must be paid. Typically they are council rates, water rates, and land tax. The escalations in these items occur because of the uncontrollable policies and rating processes of the local councils. Usually they will base their rates and charges on the property value. It is not unusual for the councils to be valuing the local properties every two years for this purpose. Retail Center Managers know the high value of monitoring and disputing the property value when it comes through. You can save extensive operational costs and payments for rates and taxes if you get a realistic property value.

Cooperation between Center Managers is therefore common and quite productive given that the job and industry is just so special. Unskilled and ordinary property managers have little chance to improve and specialize without gaining experience from other established Retail Center Managers in this part of the property industry.

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