Commercial property: Five-point plan in store for retail property

Glasgow.
Glasgow.

A radical approach to property leasing is being proposed to help shopping environments throughout the UK.

The five-point plan from property consultancy Colliers International is aimed at helping retailers access viable trading space while enabling landlords and investors to find occupiers for a rising amount of empty shops.

The proposals are a response to the challenges that the sector has faced, including the major increases in business rates last year, further growth of internet sales and the growing number of retailers shedding stores through company voluntary agreements this year.

The proposals call for a five-point plan to balance better the interests of retailers, landlords and investors.

The points include standard five-year leases, rents based on turnover, options to break based on turnover, standard white box specification and limited incentives.

In the ability to adapt leases Scotland is already ahead, as the 1954 Landlord & Tenant Act – which presents a barrier to the introduction of five-year leases – does not apply.

John Duffy, retail director for Colliers International in Scotland, says: “There are no issues in Scotland in terms of the 1954 act and landlords here already know that they need to be more flexible in terms of their approach.”

Rents should be based purely on the turnover achieved by the retailer in a particular shop according to Colliers’ recommendations, while mutual options to break the lease should also be dependent on agreed turnover thresholds.

The white box approach to shop specification – where a basic fitted unit is made available to the retailer – is designed to minimise their fit-out.

With these options in place, Duffy says that the need for incentives, such as rent-free months, should be minimised so the five-point plan lease will benefit landlords too.

He says: “The norm might be that a landlord will try to negotiate a long lease and in return give rent free months, but with a more tenant-friendly deal, they shouldn’t necessarily have to offer this.”

But Scotland does have a distinct disadvantage which the five points don’t address, which is the different approach to building warrants, north of the border.

Duffy explains: “In Scotland you need a building warrant in advance before the fit out starts.

“In England and Wales, retailers can say ‘here are my drawings’ and an approver will warrant it on behalf of the council so the work can start right away, in line with building regulations.”

The average wait for a building warrant in Scotland can be three months, which delays a retailer, particularly if they are keen to be in for a key trading date, Christmas for example.

Change in this regulation is something that the industry is campaigning for in Scotland.

Duffy says: “I’d like to see this change to follow the English model and I think everyone in commercial property in Scotland would too.

“It is a disadvantage to the market, because if a retailer is looking at taking premises in Stockport or Kirkcaldy for example, he knows that he can shave two or three months off waiting times by opting for an English site.”

“When a new retailer comes up to Scotland it can be a bit of learning curve in terms of delayed deals.

“The five-point plan is good for the whole of the UK, but the industry north of the border needs to push for building warrant changes too.”