The valuation of retail properties offers an analyst a myriad of choices. Anyone who has appraised a mall or a community shopping center can tell you of the numerous projections required for market rents, tenant fit out allowances, absorption of vacant space, downtime between leases, free rent periods, renewal probability, commission and marketing expenses, reimbursed expenses, and more. Appraisers model the behavior of buyers and sellers. Buyers initially review the location, access, and design features of a center.
Competition is measured by the center's size, image, vacancies, tenant mix, and market rents.
In major retail properties, such as community shopping centers, anchors represent the key to understanding value. Anchors can make up a significant portion of the gross income and are the bellwether for rental income for the infill tenants. First and foremost, a buyer will review the economics and length of the anchor's lease. Second, buyers scrutinize the anchor's credit, market position, and competition within the submarket. After anchor leases are understood, a potential buyer is afforded the necessary insight into the remaining economics of a shopping center's cash flow.