Consultancy Colliers International has issued a five-point plan for property leasing that it said can help both retailers and landlords by bringing in terms common to the factory outlet segment of the market.
The firm said that the proposals 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 closures brought about by a swathe of Company Voluntary Agreements in the sector this year.
In the last two months, two well established regional fashion brands have joined the casualties, with Bench going into administration in May, putting 20 UK store locations at risk. That was followed last week by Henri Lloyd, which has been kept alive in greatly decuded circumstances by Aligro, which bought it out of administration, closing four stores and 20 department store concessions, and keeping just five open.
New Look, House of Fraser and Marks & Spencer are among retailers whose troubles are spelling varying degrees of trouble for regional high streets.
Dan Simms, retail agency director at Colliers, said: “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.”
Colliers’ five-point plan reads thus:
- 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 added: “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 the opportunity for a flexible approach to costs and lease duration.
“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.
“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. 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.
David Fox, head of retail for the North at Colliers, said the number of vacant sites in the region had increased in the past year, thanks partly to the rising number of CVAs and still empty former BHS stores.
He said: “We are set for a bumpy ride in the North West over the next 12 months. While there are a variety of pressures on retailers which are squeezing profit margins, the continued structural change in the retail marketplace is the driving force, creating a significant imbalance of supply and demand.”