Learn Your Health Ratios—They’ll Make or Break the Deal

Want to know if a tenant is truly a good fit for your center? It’s not just about how great they are—it’s about how much money they’ll make and whether they can afford your rent. That’s where the health ratio (aka occupancy cost ratio) comes in.

Here’s the formula:
Annual Sales ÷ Annual Rent = Health Ratio

For example:
$500,000 in annual sales ÷ $50,000 in rent = 10% health ratio

Different industries have different thresholds, but as a general rule, 10% or under is ideal. Anything higher? 🚩 You might have a great tenant in the wrong location—or charging too much rent for their margins.

You can find industry benchmarks in the ULI Dollars and Cents of Shopping Centers guide (yep, still relevant even though the last version was 2008).

Learning to read a business plan or analyze a P&L isn’t just a bonus skill—it’s a must if you want to sign long-term, successful tenants. The rent you charge has to align with the tenant’s ability to generate sales. Period.

So before you sign that next lease, do the math. Know the ratios. And lease like a Rockstar.

Share

Blog Comments

Leave a Comment

Your email address will not be published. Required fields are marked *

More Posts

Use the ‘Top 5 Uses’ Form to Power Your Prospecting

You’ve done the homework—your market study’s solid, you’ve toured your vacancies, checked your exclusives, and you’re knee-deep in lease lingo. Now it’s time for the fun part: prospecting with purpose. Before you make a single call or send that first email, fill out a Top 5 Uses worksheet for ONE property at a time. This is where strategy meets action. Think of it as your prospecting blueprint. 🎯 Be specific: Don’t just write “restaurant.” Write “Fast Casual Mexican Taco Concept” or “White Tablecloth Steakhouse with Full Liquor License.”🎯 Match your picks to your square footage, visibility, and—most importantly—your demographics.🎯 Think about synergy: Which uses will complement your current lineup and drive traffic? When you complete this worksheet first, every cold call, DM, or knock on a door is intentional and aligned. That’s how Rockstars work. So grab your notes, get focused, and build your Top 5 Uses list before diving into your next round of prospecting. It’s a total game-changer. 📝🔥 Shopping Center Name: ____________________________Top 5 Uses:

Read More

Get the Tenant Mix Right (And Keep It Tight!)

Want to create long-term value in your center and save yourself future headaches? Start by making sure each tenant is in the right space for their use. Do you have a destination tenant—like a physical therapist—camped out on an end cap? Or a seasonal tenant (hello, tax prep in April) taking up a prime spot year-round? If so, that’s a missed opportunity. Make a note and tuck it away… because when the right prospect comes along, you might just have a chance to reposition and upgrade. ROCKSTAR TIP: Always check the lease before making any relocation promises. If they’ve got a huge build-out or relocation clause, you better know it before you offer that space to someone else. Getting the mix right means impulse tenants belong in high-visibility spots, and destination uses go in the elbows. Simple shifts in placement can drive more traffic, boost co-tenancy synergy, and improve your center’s overall performance. Right tenant, right space = Rockstar leasing.

Read More

Let Demographics Drive Your Strategy

After you’ve walked your property and completed your market study, it’s time to zoom out and ask: Who lives, works, and shops here? Because no matter how beautiful the space or how great the rent deal is, if the demo doesn’t match the use—it’s not going to work. A high-end botox clinic in a low-income center? 🚫A check-cashing business in an affluent, family-focused market? Double 🚫A pediatrician in an area being taken over by dog groomers and breweries? You get the point. So drive the market again. Take note of who’s busy, who’s expanding, and what types of uses are actually working nearby. Look at your comps. Tap back into the intel you got from your leasing agent coffee group. And here’s your Rockstar Tip:Don’t rely on 10-year-old census data. The future is in geo-fencing and real-time cell phone tracking data. This is where the industry is headed—you should be ahead of the curve. Match the right tenant to the right demo and you’ll fill space faster, keep tenants longer, and build a stronger center. Let the data lead the way!

Read More

Do a Physical Audit of Your Property

Before you decide which tenant to put where, you need to know exactly what you’re working with—and that means it’s time for a physical audit of your property. This is where Rockstar leasing starts. Walk every vacancy and take detailed notes:✔️ Dimensions (count ceiling tiles to estimate depth)✔️ Condition of the space (good, fair, or yikes)✔️ Ceiling height (and yes—use a broom to lift those tiles!)✔️ Is there gas? What’s the ampage? HVAC working?✔️ ADA compliance? Parking? Signage rules? You’re not just listing spaces—you’re learning what uses make sense based on location and visibility. End caps and outparcels? Think impulse tenants like ice cream or fast casual. Interior elbows? Perfect for destination tenants like karate studios or medical offices. And don’t forget to look at the big picture:– Can large spaces be split?– Can small ones be combined?– Who’s doing well and might want to expand?– Who’s weak and coming up for renewal next to a vacancy? The more you know, the smarter your leasing strategy becomes. Get out there, take notes, and know your property like the back of your hand. Rockstar status starts with the walkthrough.

Read More

Beth's Resources

Beth has established a reputation for “giving back” and creating a legacy of helping others. To support this mission, she offers a wealth of FREE resources for individuals in the retail leasing industry, whether you’re a newcomer or a seasoned professional. Her collection includes case studies from her nearly 40 years of experience, providing practical insights and guidance. With Beth’s resources, you’ll gain valuable tools to navigate the complexities of retail leasing and achieve your professional goals.

E-News

Subscribe to the Beth Azor e-news to stay up to date with commercial real estate trends, events, and expert advice.

We promise, no spam. Just great content.

E-News

Subscribe to the Beth Azor e-news to stay up to date with commercial real estate trends, events, and expert advice.

We promise, no spam. Just great content.