Retail Development

The retail development process includes the following main stages:

1. Analysis of project feasibility as well as financing alternatives and their impact on project profitability

2. Planning and design of new centers or expansion and rehabilitation of existing centers

3.Tenant planning, selection of optimal tenant mix, negotiations with potential tenants and signing of pre-leasing agreements

4. Operations, center management, and marketing

Location Analysis

Location analysis for the development of retail centers includes:

-Econometric analysis of the local retail market and production of forecasts of retail space demand, supply and rents

-Analysis of demographic structure and trends in the center’s trade area

-Daytime population and employment projections in the project’s catchment area

-Shopping patterns analysis and implications for demand and center tenant mix composition

-Consumer expenditures and sales potential

Types of Retail Centers

The development process does not vary considerably by type of retail center. There are though some specialized considerations that need to be taken into account when dealing with the different categories such as:

1. Single-use shopping centers combined with entertainment, food, and/or community gathering or children’s center

2. Hybrid centers including street retail strips and infill development projects that connect to existing urban concentrations

3. New town centers on greenfields

4. Mixed-use shopping districts or planned community shopping centers

5. Mixed-use projects with retail component that supplements residential, office and hospitality components

6. Redevelopment/renovation of outdated sub-functional malls

Anchor Concerns

Attracting anchors is utmost crucial for any successful shopping center development. For this reason it is important for retail developers to understand the factors that drive the location decisions of anchors. These are, but not limited to, the following:

–Size and demographics of population residing within the project’s trade area

–Growth pace of residential population within the center’s catchment area

–Existing and planned competition in local market pipeline

–Counts of passing by traffic

–Road projects that may have beneficial effect on traffic counts in front of the site or that may divert passing by traffic

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Real Estate Investment Mathematics
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Internal Rate of Return(IRR)
The 3 Formulas for Modified IRR (MIRR)/Financial Management Rate of Return (FMRR)
Potential Gross Income Multiplier (PGIM)
Potential Gross Income
Effective Gross Income Multiplier
Effective Gross Income
Net Income Multiplier
Net Operating Income
Overall Capitalization Rate/Income Return
Capitalization Factor
Band-of-Investment Formula for Estimating a Market/Required Capitalization Rate
Theoretical-Approach Formula for Estimating a Market/Required Capitalization Rate
Appreciation Return
Total Return
Return on Total Capital (ROR)
Return on Equity (ROE)/Cash-on-Cash Return/Equity Dividend Rate
Before Tax Equity Cash Flow (BTECF)
Equity Investment
Loan Amount
Debt Service
Mortgage Constant
Payback Period
Breakeven Occupancy
After Tax Cash Flow (ATCF)
Taxable Income
One-Period IRR
Income Tax Payment in Association with Income Producing Property
Capital Gains
Formula for Cash Flow for Last Period of Analysis
Future Resale Price
Annual Rental Income of Occupied Multi-Tenant Property
Multi-Period Lease Rate Growth Formula with Intertemporally Variable CPI Forecast
Multi-period Lease Rate Growth Formula with Constant CPI Forecast
Present Value (PV)
Net Present Value (NPV)
Profitability Index
And more …….

Return from Retail Development to Shopping Centers

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The Retail Development Process

Location Analysis

Types of Retail Centers

Anchor Concerns