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Retail expert calls for outlet style leases to help revive retail

A retail expert has called for the factory outlet style leases that are a feature of retail success stories such as Bridgend Designer Outlet in Wales to be brought in to help revive shopping centres and high streets.

Nick Turk, a director specialising in out of town retail in Wales for industry leading real estate services company Colliers International, said:

“Altering retail leases could help both retailers and landlords affected by recent major increases in business rates, internet shopping and the growing number of retailers shedding stores through Company Voluntary Agreements (CVAs).

“Outlet shopping has been a modern retail success story, and Bridgend Designer Outlet in Wales very much illustrates this. It is worth looking at this model at a time when the property industry needs to think about a radical reshaping of the lease model for much retail property.

“This model is popular with shoppers because of the discounts available, but it has also proven popular with retailers and landlords because the leases offer greater flexibility which is beneficial to both parties.”

Mr Turk made his comments after Colliers International published a five-point plan for supporting the UK’s troubled retail sector, which was unveiled ahead of the launch of its annual Midsummer Retail Report. It calls for:

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

Mr Turk said:

“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.”

The five-point plan from Colliers International 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.

It 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.

House of Fraser recently avoided going into administration after creditors agreed to a CVA that will result in 31 store closures.

Colliers’ Retail Agency Director, Dan Simms, 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.

“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.”