Total centre sales mix the tenants' trading with changes to the line-up. The like-for-like separates them, and stripping out the anchor shows what the line shops are really doing.
Like-for-like sales growth compares only the units that traded for the whole of both periods on unchanged floorspace: sum their sales this year, divide by the same units' sales last year, and subtract one. On an illustrative eight-unit shopping centre whose total sales rose 8.32 per cent, like-for-like growth is 2.78 per cent, and 0.02 per cent once the supermarket anchor is taken out. The headline number was made by an extension and a new letting, not by the tenants selling more.
Worked in full in Retail Real Estate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Retail is the main property type in which tenants routinely report what they sell, and the sales line is what the leases are worth: turnover rent is paid on it and the occupancy cost ratio is tested against it. Total centre sales mix two different things, the trading of existing shops and changes to the line-up. Only the first tells you whether the rent the existing tenants pay is becoming easier or harder to afford. Total sales is the tempting figure to report because it is usually larger; buyers should ask for the like-for-like.
| Unit | Area m², last year | Area m², this year | Sales last year | Sales this year | Change | In the like-for-like? |
|---|---|---|---|---|---|---|
| A, fashion | 450 | 450 | 1,800,000 | 1,746,000 | −3.0% | Yes |
| B, grocery anchor | 4,000 | 4,000 | 9,500,000 | 9,880,000 | 4.0% | Yes |
| C, cafe | 180 | 180 | 600,000 | 642,000 | 7.0% | Yes |
| D, health and beauty | 300 | 300 | 1,100,000 | 1,078,000 | −2.0% | Yes |
| E, value retailer, extended | 900 | 1,400 | 2,000,000 | 2,900,000 | 45.0% | No: area changed |
| F, electronics, closed in month 4 | 600 | 600 | 1,500,000 | 400,000 | −73.3% | No: closed |
| G, sports, opened in month 3 | 0 | 650 | 0 | 1,250,000 | n/a | No: new |
| H, jeweller | 90 | 90 | 700,000 | 735,000 | 5.0% | Yes |
| Centre | 17,200,000 | 18,631,000 | 8.3% |
1. Select units trading the full twelve months in both years with unchanged area: A, B, C, D and H.
2. Like-for-like sales last year = 1,800,000 + 9,500,000 + 600,000 + 1,100,000 + 700,000 = 13,700,000
3. Same units this year = 1,746,000 + 9,880,000 + 642,000 + 1,078,000 + 735,000 = 14,081,000
4. Like-for-like growth = 14,081,000 / 13,700,000 − 1 = 2.78%
Excel, with a flag column F set to 1 for comparable units: =SUMIFS(E:E,F:F,1)/SUMIFS(D:D,F:F,1)-1
The comparable units held 79.7 per cent of last year's sales, so the like-for-like covers most of the centre. That share is worth stating alongside the growth figure: a like-for-like built on a third of the tape describes very little.
Like-for-like excluding B: 4,201,000 / 4,200,000 − 1 = 0.02%
Of the 381,000 like-for-like increase, the anchor supplied 380,000. The other four units together added 1,000.
A sales-weighted like-for-like is dominated by the largest tenant, and on a grocery-anchored centre that is a supermarket whose sales have little to do with whether the fashion and health and beauty units can pay their rent. Report both. The figure that matters for the line shops' rent is the one without the anchor, and here it is flat in money and down 2.9 per cent in real terms with inflation at 3.0 per cent.
| Units included | Sales last year | Sales this year | Growth |
|---|---|---|---|
| All units (total sales) | 17,200,000 | 18,631,000 | 8.32% |
| Excluding openings and closures, keeping the extension | 15,700,000 | 16,981,000 | 8.16% |
| Strict like-for-like | 13,700,000 | 14,081,000 | 2.78% |
| Strict like-for-like without the anchor | 4,200,000 | 4,201,000 | 0.02% |
The extended unit does most of the damage when it is left in. Its sales rose 45.0 per cent because it has 1,400 m² instead of 900; per square metre they fell from 2,222 to 2,071, down 6.8 per cent. If you want to keep a changed unit in the sample, compare sales densities rather than sales. The opening added 1,250,000 and the closure removed 1,100,000, so in this year they almost cancel; in a year with more lettings than failures they would not, and the total would flatter the centre further.
A like-for-like near zero is not neutral for the landlord. With rents fixed or indexed and sales flat, every tenant's occupancy cost ratio rises each year. How much growth a tenant needs to stand still is worked in how much sales growth a retailer needs to keep paying its rent, and the effect on turnover rent in how turnover rent is calculated.
The book builds the sales line unit by unit and tests every rent on the tape against it; the tape and the formulas are in the free workbook for this case.
No. A unit enters the like-for-like only once it has traded for the whole of both periods being compared, usually after its first full year. In the worked centre a sports store opened in month 3 adds 1,250,000 to total sales but nothing to the like-for-like, which is 2.78 per cent against 8.32 per cent total.
Exclude it, or compare its sales per square metre instead of its sales. In the worked case a value retailer extended from 900 to 1,400 m² grew sales 45.0 per cent while its density fell from 2,222 to 2,071 per m², down 6.8 per cent. Leaving it in at sales level lifts the measured growth to 8.16 per cent.
Normally weighted: sum the comparable units' sales in each year and divide. The simple average of unit growth rates treats a jeweller like a supermarket. On the worked tape the weighted figure is 2.78 per cent and the simple average 2.2 per cent; without the anchor the weighted figure is 0.02 per cent.
This article is one calculation from Retail Real Estate. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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