A tenants' market

Despite market fears, Liverpool One opened with only a limited amount of unlet space and both the big White City and Bristol developments are letting well.

So does this mean that the retail market is much better than we all thought and that retailers are crying wolf? Don’t you believe it.

The reality is that retailers are getting amazing deals to take space at new developments. This isn’t being reflected so much in the headline rents, which developers are desperate to maintain to hold up the values of their schemes, but rather in the incentives that developers are throwing at their tenants.

Incentives are a bit of a grey area. Understandably, neither retailers nor developers have any interest in disclosing the packages being offered. But, whether they are lengthy rent-free periods or generous contributions to fit-out costs, now is a good time to be doing deals.

That’s how it should be. These are good schemes in good locations that many major retailers will need to be in, but it is only right that the terms on offer reflect the challenging market retailers are experiencing.

However, retailers need to think carefully. When landlords are throwing the kitchen sink at you in terms of incentives, it’s easy to be tempted into deals you don’t need to do. For many retailers going through tough trading right now, the last thing they need to be doing is taking new stores.

The store will be around for a lot longer than the rent-free period and even if the rent is lower now, that rent review will still come along in five years’ time.

So while for many retailers, going into new developments will be the correct decision, there are some for which deals will be a bridge too far. At any time – but especially in this market – a property deal has to be done in the right place, at the right price.