An end to traditional lease arrangements may be one solution to help secure the future of the High Street, says a commercial property specialist at Bedell Cristin.
Advocate Jeff O ‘Boyle, Head of Property at Bedell Cristin, points to trends in the UK where respected professional bodies in the property sector are actively discussing shorter leases which offer a great deal more flexibility.
The need to re-consider the lease arrangements between landlord and tenant has been exacerbated by the pandemic and the increasing number of shop closures or liquidations on the High Street announced in recent months. The Island is not immune to the same pressures that are affecting retailers and High Streets in the UK.
Jeff lists a series of initiatives that ought to be considered in future leasing arrangements in Jersey:
- Turnover rents
- Variable monthly rents
- More ‘green’ leases
- Sharing uses in one outlet
Jeff commented: ‘Already popular in large shopping centres, are turnover rents where the tenant pays a base rent plus an additional amount calculated as a percentage of the retailer’s turnover. Even more innovative is the use of variable monthly rents, a mechanism is included in the lease where the tenant may pay a higher rent at certain times of the year, such as in December, and lower or zero rent in a month when cashflow is normally lower such as January or February.
“Another option is for the landlord to consider implementing ‘greener’ measures such as solar panels or energy saving systems in buildings which will not only help reduce overheads for the tenant but will also improve a landlord’s green credentials.
“Fourthly, and increasingly common, is the idea of sharing retail space such as, for example, where a café opens in part of an outlet to both add to footfall and help share out rental costs”.
Jeff added that the fourth measure was already a growing trend in Jersey and he cites a new style example in St Helier where a bank operates branch banking facilities in a High Street outlet which also includes a cafe. The pandemic has also illustrated the option of remote working for many office workers.
As a result, the flexibility deemed necessary in the High Street may also need to be extended to leases arranged between landlord and tenant in relation to office buildings as firms begin to offer a blend of working from home and working in the office in future.
Offices are clearly here to stay but landlords will need to adapt to the changing demands of occupiers. The office lease market may see a need for smaller space, flexible terms, serviced offices and even the innovative ‘WeWork’ model whereby small and start-up businesses rent workstations rather than full office floors or buildings.
As ever, commercial landlords who are willing to take the lead and break with tradition may gain a significant competitive advantage.