September 4, 2019
It is impossible to avoid the frequent headlines of national retailers announcing store closures and requesting Company Voluntary Arrangements (CVA).
The most recent has been the approval of a CVA for Monsoon Accessorize following the closure of almost 40 stores in the last two years, with a further 135 stores planned to receive rent reductions.
This is becoming common place in the retail market, with the British Retail Consortium reporting that 1556 landlords have had to reduce rent levels.
As a result of this, other retailers feel they have been left at a disadvantage to their competitors by paying significantly higher rents than those who have entered into CVAs or other forms of insolvency procedures.
Primark has reportedly requested landlords cut some of their rents by 30 per cent in exchange for extending their lease terms or investing in improvements to the properties.
These issues have arisen due to an accumulation of factors that include the uncertain economy, burdening business rates and the success of online giants, such as Amazon.
This has caused a lack of confidence in retailers and a reluctance to enter into new and onerous lease agreements.
As it appears unlikely that there will be a drastic change any time in the near future, landlords are encouraged to adapt to the market by being open to broader marketing strategies.The key to this is being as flexible as possible.
One of the simplest ways to do this is by being open to alternative uses.
We have experienced a significant growth in enquiries from potential tenants looking to occupy former retail spaces to provide services such as aesthetics clinics, dental care and professional services, as consumers increasingly look to visit the high street for services and experiences, rather than to visit standard shops.
Permitted Development Rights enable change of use and certain building works to be carried out without having to submit a planning application. Class Use A1 (shops) is permitted to change to professional services, restaurants and cafes, offices, dwelling houses and assembly and leisure; although some of these are subject to size constraints and prior approval.
For those change of uses which require planning permission, entering into an Option Agreement or an Agreement to Lease can be beneficial to both parties.
Although these are not typical mechanisms when dealing with retail lettings, they provide the landlord with the added security that the tenant will not lose interest or find another property while awaiting the necessary consents.
A further strategy is for landlords to offer more lenient lease terms than would have previously been recommended.
Negotiating incentives, such as rent-free periods, rental discounts or a fit-out contribution, will be attractive to wary tenants along with less onerous repairing obligations, shorter terms and regular break options that would have historically been avoided.
As we adapt to the future of our high street, it is important to seek professional advice to ensure you are receiving the maximum potential from your property.
Get in touch if you would like advice on lettings or any of our other commercial services.
George F. White
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