Landlords and retailers: co-operate to save high streets

Recent reports suggest that health clubs and restaurants are replacing high street retail shops, as consumers opt to focus on attending gyms and dining out and turning away from purchasing goods on the high street. Since the boom in online shopping, the high street has suffered significantly as it has struggled to keep up with the demands of the digital generation. Online shopping is generally considered to be easier, with a wider variety of choice and prices. Consumers are not restricted to opening hours, and with certain online outfits now offering a wide range of delivery options, including same-day delivery and the ability to collect goods from a wide range of locations, consumers can now receive their purchases swiftly. There are, of course, disadvantages to online shopping. There is no ability to try items of clothing on, the quality of the goods being purchased cannot be determined and there are no sales assistants to answer questions about the products (although certain retailers do now have online chat facilities). Privacy and security are also an issue, with online fraud becoming more prevalent. Returning unwanted or damaged goods purchased online can also be a rather tedious process depending on the retailer. The advantages of online shopping, however, largely outweigh the disadvantages and its popularity shows no sign of slowing. Empty retail units on the high street are increasingly becoming the norm as retailers close unprofitable stores and choose not to renew their business leases. The collapse of BHS has also left many larger retail units empty and with Jaeger now the most recent casualty, high street woes appear set to continue. This has not been assisted by the fall in the value of the pound since Brexit and rises in price inflation resulting in goods becoming more expensive. The issues facing the high street affect not only retailers, but also landlords who face dents in their income stream and have to work harder to attract retail tenants. If consumers are choosing more experience-based and leisure activities, retailers and landlords need to give careful thought as to how to face this latest challenge. Landlords can encourage retailers to remain on the high street by being more flexible with tenants on the terms of leases and permitting more non-traditional arrangements, such as allowing pop-up tenants to occupy vacant units for short periods of time under a licence or a tenancy at will. Landlords should also be aware that many retail tenants are increasingly reluctant to take long-term leases of commercial premises with no ability to terminate the arrangement before the lease expires. Break rights should therefore be included in leases so that tenants are afforded the opportunity to terminate their leases earlier than the end of the contractual term. Consideration should be given to be rewarding tenants if they choose not to exercise their break right, for example by way of a small rent-free period once the optional determination date has passed. Landlords should also be offering smaller retail tenants the opportunity to share their space with another tenant to enhance the overall consumer experience, such as permitting a small fashion retailer to occupy premises with a beauty salon or café, similar to concession arrangements typically seen in larger shops and department stores. Such sharing arrangements could lead to a dilution in the landlord’s control over the premises and lead to a landlord-tenant relationship between the landlord’s tenant and the occupant, but this can be overcome in part by careful lease drafting. A clause permitting sharing occupation with non-group companies should be qualified so that landlord’s consent is required and should stipulate that for smaller premises, only one such arrangement can exist, with the occupier taking up only a certain proportion of the premises. It is prudent for such arrangements to be way of licence only, to avoid the occupant from acquiring security of tenure. Retailers need to focus on enhancing the in-store experience and offer services that cannot be matched by online retailers, including excellent customer service. The value in carefully choosing the correct fit-out cannot be underestimated as the layout of a shop can have more of an influence than the actual products sold. With social media being more and more influential, all retailers should also have a defined social media plan and a clear online presence. Premises that already have or which can offer wireless connectivity allow shoppers to use in-store WiFi to compare and research products, and post to social media about their activities. Retailers and landlords must therefore work together and focus on adapting the traditional high street model to suit today’s digital age. Francine Blanc is an associate at Russell-Cooke