22 Aug 2011
Policy area: Town centre & Retail
Landlords have presented Mary Portas with the largest ever independent study of retail tenancies - revealing unprecedented new leases – as an important contribution to her review of the high street.
Separate independent IPD data has also been submitted, illustrating that in real terms high street shop rents have fallen by a third over the past 20 years.
Portas, who is in the midst of her review, has indicated she is keen to understand the relationship between landlords and occupiers, and current trends in leases.
The Investment Property Databank (IPD) study of 47,708 retail tenancies – the largest of its kind - paints a picture of retailers benefitting from the most flexible lease regimes ever. The data shows:
The separate IPD data on standard shop rents shows that whilst inflation has risen by 94% since 1989, rents for standard shops have only risen by 24%, and in real terms therefore fallen by 37%.
Drilling down further:
And because rate increases are linked to RPI, shops will have seen their rates bill rise, roughly speaking, by 94% since 1989.
Liz Peace, chief executive of the British Property Federation, said: “The issues facing our high streets are extremely complex with recession, structural changes caused by the internet and consumer preference all in play. In such times of change it is important that leases adapt.”
“Today’s data clearly shows landlords are increasingly flexible and retail property leases continue to adjust to economic conditions, with leases that are shorter, offering breaks and substantial rent-free periods to help new shops to get off the ground.
“Whilst rents in prime retail areas and sites such as shopping centres will have increased substantially, many high street shops will have rents that in real terms are substantially lower than in 1989.”
“During the last early-90s recession, there were legitimate claims from the retail community that the ‘institutional lease’, which commonly was for 20 years plus, with upward only rent reviews and no breaks, was inconsistent with many retailers’ needs. The property industry has significantly changed the variety of its offer and I don’t think that is always well recognised.”
“Rather like our high streets, however, the property industry thrives on its variety, and ability to raise investment. There is no one size lease, but a mix that caters for our industry’s office, industrial and retail customers.”