Landlords are living in the past

While those retailers that fared better over Christmas will still continue to expand this year, many are reviewing their portfolios and may only take a handful of new sites. This year, there will be few stories of retailers seeking 50-plus new stores. Instead, we will see retailers quietly trying to offload underperforming stores and opening up only in key areas where they will see a return fast.

Despite this cautious outlook, retailers are still not managing to achieve flexibility in their deals. At Retail Week’s Property Directors’ Club last week, the talk of the table was that landlords are still not being realistic. Retailers were bemoaning that, if consumers can see that we are heading for a downturn and tightening their purses, why can’t landlords see that the market has changed as well?

Landlords are struggling to fill some of the new schemes opening this year and the situation for secondary space is just desperate. Yet, while retailers are being bunged certain incentives to take space, traditional upward-only leases remain the norm.

It seems that landlords are prepared to throw money at a retailer initially in order to fill their space, but won’t budge on flexible leases. Most landlords will say that they will consider turnover-based rents or rents that are capped according to RPI yet, when it comes to the crunch, they crawl back behind the archaic upward-only rent reviews.

Landlords are being very short sighted. One property director said last week that if they could achieve more flexibility in their leases then they would be able to sign up for more stores. They just couldn’t take the risk of having their rent hiked up enormously in five years if the outlook for the next couple of years is less than booming.

With so many new schemes coming out of the ground, it seems bizarre that landlords are effectively turning away retailers. They are scared to commit to anything that goes against the norm and in the long run, they will suffer.