The race is on to find a new retail leasing model - Boodle Hatfield

Your lawyers since 1722

13 Oct 2020

The race is on to find a new retail leasing model

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Retail agents teamed with data consultancies are racing to come up with new and innovative leasing models that would see rents linked to footfall and would include online sales. 

Long leases with upward-only rent reviews have driven a passive asset management culture which is widely accepted to be no longer viable as retailers face severe competition from online rivals. The issue has become more acute as a result of the pandemic.

Traditional turnover deals are one option but there is little consistency across the sector and recent deals have seen landlords accepting as little as 2% of turnover. Treatment of online sales is often contentious, with tenants seeking to exclude them and landlords arguing that the physical store presence enhances the tenant offering and therefore often serves to boost overall sales (including online). 

Both landlords and tenants alike will want to ensure that going forward they can create a relationship that is sustainable and having an industry standard for how turnover rents were calculated would help with transparency. Essentially all parties need to move with the times if we want the physical retail sector to survive. 

New leasing models that would link rent to shop visits and online sales in a catchment area are being considered by some of Britain’s biggest landlords and retailers.

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