New property leasing approach proposed to target UK retail troubles

A radical approach to property leasing is being proposed to help shopping environments throughout the UK.

The five-point plan is aimed at helping retailers access viable trading space while enabling retailers, landlords and investors to find occupiers for the rising amount of empty shops across the UK.

The proposals come from leading property consultancy, Colliers International, and are a response to the havoc that has been wrought on the sector by major increases in business rates last year, further growth of internet sales and the growing number of retailers shedding stores through Company Voluntary Agreements (CVAs) this year.

Colliers' Co-Head of Retail Agency, Dan Simms, comments: "We understand the inordinate pressures that retailers are currently facing as long-term structural changes to the retail market play out. But retailers, landlords and investors face equal challenges, and the way forward has to be an equitable approach which respects the situations of both.

"The property industry now needs to think about a radical reshaping of the lease model for much of our retail property."

The proposals call for a five-point plan, which would better balance the interests of retailers, landlords and investors. They call for:

  • Standard five-year leases granted outside of the 1954 Landlord & Tenant Act
  • Rents based purely on the turnover achieved by the retailer in a particular shop
  • Mutual options to break the lease dependent on agreed turnover thresholds
  • A 'white box' approach to shop specification where a basic fitted unit is made available to the retailer to minimize their fit-out
  • Limited incentives/ rent free

Simms observes: "These types of lease features are relatively common in the retail factory outlet environment but have not been brought in a structured way into the mainstream market. They create genuine alignment between landlord and occupier, and offer both the opportunity to flex rents and occupation of space.

"This isn't just blue sky thinking. This model won't be relevant to some circumstances, particularly in fragmented ownership High Streets and for flagship stores but there are an increasing number of similar leases being agreed across the UK and we are close to launching a leasing campaign for a new mall redevelopment within a well-established shopping centre where all leases will be offered on this basis."

The proposals come ahead of the consultancy's annual Midsummer Retail Report which is launched this week. The report also calls for reform of the CVA process and suggests a series of areas where the process can be changed to make it more equitable.

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