Customers first

A traditional view goes that bad times for landlords mean good news for retailers, because landlords are keener to do deals and better terms can be agreed.

This is undoubtedly true for those retailers that are on the front foot and still on the expansion trail – the problem is that there are many more that are on the back foot now and endeavouring to struggle on through troubled times.

And this is the time when the more collaborative relationship that has been forged between landlords and retailers in recent years will really be put to the test. When retail is doing well, developers will say that it’s the market that’s determining terms such as length of lease and the type of rent reviews.

When the market is bad, however, the converse argument should go that tenants are offered more flexible leases at lower rents than when the market is good. However, landlords are not at all keen on allowing headline rents to fall, thus damaging the value of their centres. What they much prefer is to offer fantastic incentives for retailers to move into their schemes.

Equally important, though, in tough times like these is that shopping centre owners work together with their retailers when they hit difficulty. That means accepting monthly rent payments where tenants ask for them and trying to find solutions when units aren’t working for tenants.

In markets like this, a co-operative approach from landlords can make the difference between a business carrying on and going under. The problem for retailers is that the approach of property owners varies hugely. Broadly speaking, the major corporate property owners tend to be more flexible, but private investors – many of whom are doubtless hurting under huge debt burdens – are less willing to play ball.

This is a challenging time for the shopping centre industry. Centre owners are suffering on the one hand from falling values and on the other from lower tenant demand. But this shouldn’t deter them from investing in their centres and making sure that they’re as inviting as possible for shoppers. That becomes more crucial than ever in a market like this, when centres will have to work harder to persuade people to make the effort to visit.

Well located, well-managed centres will always have a future, no matter how severe the downturn. But the key to -success is thinking of the cus-tomer first – both the retailer and the shopper.