A major element of managing risk as a retail property owner is understanding incumbent (and target) retailer performance. This applies particularly in respect of the level of rent that tenants can afford to pay in a specific unit, as well as their overall financial stability.
Over many years FSP has built, and maintains, possibly the most detailed retailer database in the industry. It holds records for over 35,000 UK and international retailers and contains a wide range of published and unpublished information. When major retailers issue their annual accounts FSP analyses their performance and updates its model; this acts as the basis for quick and accurate evaluation of any location across two aspects:
Every unit has strengths and weaknesses relating to size, configuration, pitch, competition, mix etc. FSP has extensive experience in flexing its retailer model to ensure that each of these factors is weighted to make it as specific as possible for each operator. This avoids the reliance on generic data often applied by other consultants. Depending on the passing (or turnover) rent in force, FSP then uses its model to estimate likely sales, unit profitability and return on investment. This information is invaluable for quick pre-acquisition analysis but also for regular evaluation of performance across shopping centres, retail parks, outlet malls and high street stores.
FSP analyses retailers’ annual accounts and, based on a series of ratios, establishes their comparative financial health. For many retailers FSP now holds a time-series pattern of performance which can indicate trading and profit direction. Operators are classified into broad groups (eg Healthy, Head Above Water, Very Worrying); the vast majority of retailers forced to stop trading fall into the latter category
FSP uses a matrix of information combining unit and corporate performance to show the proportion of passing rent at risk. As retailing is inherently dynamic, regular evaluation of the risk matrix helps property owners and investors keep ahead of the game.