UK retailers want fair deal from landlords
BRC suggests sales-related rent
Kevin Hawkins, director general of the British Retail Consortium, has called for a ‘fairer balance’ in the relationship between the property industry and retailers, suggesting that sales turnover would offer a fairer basis for rental negotiations.
In a speech at retail property organisation BCSC’s 2004 Conference & Retail Showcase in Manchester, Hawkins, director general of the BRC since April, called into question the relationship which exists between retailers and the property industry.
He warned the 1,900 delegates attending the conference on retail and shopping centre destinations that time was ‘running out’ for inflexible commercial leases – particularly upward-only rent reviews. He added that the industry has ‘one last chance’ to make its voluntary code on commercial leases, created in 1995, work.
Hawkins said: “Where rent reviews still exist, 99 per cent are upward-only. The government clearly isn’t happy with the status quo, although whether, as some property investors believe, Ministers ‘have got it in for the property industry’, seems a bit far-fetched.”
Adding that most BRC members aren’t happy with the status quo either, Hawkins said that the organisation’s own survey of 61 companies representing one-third of all retail sales in the UK, was fairly indicative of the problems.
“In the past 12 months only 22 per cent had successfully negotiated flexible leases in line with the code of practice. The perception among many retailers, large and small, is that they carry a disproportionate share of the investment risk.
“If the property industry seriously wants a partnership with the retail industry – and I believe at least some of its members do – then we need a fairer balance between the two.”
Martin Moore, managing director of Prudential Property Investment Managers has responded that the complexities of introducing more flexibility in leases was being overly simplified into a debate about upward only rent reviews.
Moore called for the Commercial Leases Working Group – which developed the voluntary Commercial Lease Code – to be reconvened as the best forum for constructive dialogue and continuing to drive forward the practical implementation of the code in partnership.
He said: “The lease code was a direct response to the Government’s desire to introduce more flexibility in leases. It covered 23 different aspects of lease agreements. Large retailers and the recently completed consultation process focus on just one part of the voluntary code, the irony being that if it were to result in legislation it would reduce occupiers’ choices.
“The Government’s laudable desire to protect SMEs from entering in to lengthy and complex leases that they may not fully understand is being subverted to serve the needs of big business.
“In fact average lease lengths for all types of organisations have come down to under eight years as landlords respond to the changing requirements of their customers. Over 75 per cent of leases now being taken by SMEs are for short terms of five years or less without rent reviews.”
