Landlords and tenants are battling over how to rentalise shopping centre leases in the ever-changing consumer landscape.
New methods of shopping include click and collect, mobile payments and wave and pay which have increased hugely in popularity in the last few years. Shopping centre leases often include a turnover rent and these have historically captured ‘cash through the till’. The same clauses being negotiated now are far more contentious as both landlords and tenants seek to ensure the right balance is being struck on what is and is not captured as turnover.
Online payments cause problems where they are fulfilled from the store. Retailers will account for such payment in different ways, often through a central payment system and therefore not showing up on a store’s payment system. Landlords are increasingly seeking to include wide ranging turnover provisions to capture all forms of online and digital shopping, whether fulfilled centrally or locally. This is disadvantageous to tenants, as such provisions obviously force up the level of turnover rent payable if such transactions are included and can add a lot of administration.
Landlords also are mindful of the increased back of house space required to house click and collect orders and this comes into play in rent discussions. It is a difficult balancing act for tenants both logistically and when taking new space. As has been seen recently, one way John Lewis has dealt with this is to introduce a small charge for click and collect orders under £30.
Retailers will need to keep pushing landlords on what can be excluded on rentalising the unit, which may be difficult if they are negotiating terms with a perceptive and forward thinking landlord. The end result, at present at least, seems to turn on the bargaining power of the tenant retailer, as landlords are more likely to concede their stance for the biggest names. As technology develops, this will be an ever-changing issue, with the likelihood being eventually, all payments will run through a single device, most logically a mobile phone.
This article was written by Jennifer Nowecki (Jennifer.Nowecki@osborneclarke.com). Jennifer is an associate in the Bristol Real Estate team with experience in acting on retail matters. At OC we are very much aware of the current issues in the retail tenant industry and experienced in negotiating the best deal for tenants.
