What is your Lender Looking for? What are the retail real estate lending rules? Your lender will consider tenant quality, building design & location, competition, parking & access, plus overall consumer/customer appeal.
The retail real estate landscape is changing. On-line shopping, changing consumer preferences, the blurring of distinction between the product mix carried by various retailers, the ongoing development of power centres and big box stores, means that traditional centres may no longer be “anchored” as they once were. Larger centres however do often have a dominant retailer. Lets take a closer look at lender’s concerns, or their “rules” for granting credit secured by retail real estate.
- Does the dominant retail tenant have proven local, regional, or perhaps national brand recognition, strong stores sales, and market dominance?
- Does the centre present an attractive appearance and provide a convenient shopping experience for consumers?Is the centre oriented in such a way as to provide good tenant exposure to pedestrians and vehicles passing by?If fronting on a major arterial, is there a traffic signal controlled intersection, or left-in and left-out turn lane?
- Is there sufficient parking?
- Are there proper (ideally rear) loading facilities for product delivery for tenants?
- Does the centre provide for a good mix of retailers, offering a broad range of products and services?
- Does the centre dominate the immediate market?
Your property likely does not have all of these attributes. What is important is your ability to confidently articulate how you will retain existing tenancies, and attract new ones.
When considering smaller retail assets, including strip centres as well as neighbourhood retail developments, lenders will also consider:
- Is the layout, design, and configuration of the retail units adaptable for different retailers?
- Does the centre have a good history of high occupancy? Can you demonstrate minimal turnover and high tenant satisfaction at your location?
- Is the property located in a natural retail trade area?
- Is the specific location of the property attractive for both your tenants, and potential consumers?
Know the “rules” that lenders apply to credit considerations on retail real estate. You’ll be well equipped to advocate for your property as a low risk real estate lending opportunity!