UK store rents to link more closely to footfall, turnover post-pandemic

May 11, 2020
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The coronavirus crisis could lead to a change in the way retail rents are calculated in the UK with a move away from the long leases and upward-only rent reviews that have been the norm until now.

The way UK store rents are calculated could change

This could mean the UK becoming more like the US, France and Italy, where shorter leases and part of the payment being linked to turnover and visitor traffic are more common.

UK shop rents have long been on an ever higher trajectory, until recent years when the combination of Brexit uncertainty and the shift online saw more and more retailers struggling to pay both high rents and high business rates.

The Times on Monday quoted Colliers International, the property consultancy, saying that over 40% of landlords are more likely to consider factors such as footfall and turnover when deciding an asking rent in future.

It added that nearly 80% of retail landlords expect the pandemic to lead to permanent changes in the way shop rents are calculated. The firm surveyed landlords that own over 120 million sq ft of retail property to reach its conclusions.

Colliers’ head of strategy, Matthew Thompson, said that at present, landlords are able to use "masses of relevant data sets" to bring more precision to pricing that will be of benefit both to property owners and their tenants.

However, this would rely on a high level of trust between landlord and tenant. This is something that has been in short supply given the large number of company voluntary arrangements that have been happening in recent years, and also the failure of many retailers to pay their rent on time in the past couple of months.

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