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How has the relationship between landlords and retail tenants changed?

Industry insider’s share their thoughts.

Jo Davies

Owner of premium womenswear indie Black White Denim in Wilmslow, Cheshire

Jo Davies

Our landlord has been great. We opened almost three-and-a-half years ago and we have a 10-year lease with a five-year break clause. He owns the whole block where we are, and it is predominantly populated with premium boutiques such as Jaeger and Viyella. He’s keeping his stable of tenants very much at the premium end.

This summer has been pretty tough and he has been very flexible. When we first took out our lease we gave him a bond and we asked him if we could use a part of the bond (a deposit that sits in his account) to satisfy the last quarter’s rent, and he was happy for us to do that because he understands the difficulties we face.

I think part of the problem for high street [premises] is that they are owned by a disparate group of individuals and corporate companies, and they don’t necessarily work together. We share information about trading and overheads with the other retailers here, because the last thing we want if a new tenant comes into the block is for them to pay a ridiculous rent - that would set a precedent for us all.

Linsay Miller

Estates manager at footwear chain Schuh

Linsay Miller

We are finding that landlords are looking to speak to us far more than in previous years. With the British Council of Shopping Centres conference looming, it was noticeable that the first appointments in the diary were with the major retail landlords to discuss our existing store portfolio and new opportunities.

Landlords are asking to understand our business, especially the relationship between our bricks-and-mortar stores and ecommerce. We are finding that all parties are cutting to the bones of the transaction quicker and the leasing structure is changing as a result.

Earlier in the year, when we were faced with the possibility, and in some cases the reality, of concessions closing after Republic fell into administration, we very much appreciated the hands-on approach of numerous landlords.

Conversations in most cases quickly became direct and within a short space of time we had an agreement for 10 temporary lets and were allowed as much flexibility as we required to plan our withdrawal from the Republic fascia.

Iain Mitchell

UK commercial director at shopping centre owner Hammerson

Iain Mitchell

There has been a noticeable shift in the relationship with retailers, which has been accelerated by the structural changes taking place in retail. We’re both making a big effort to understand each others’ business models and the level of information being shared is far more detailed. We have a much better awareness of retailers’ drivers of profitability, which helps us appreciate store sustainability and performance.

The arrival of more international retailers in the UK has provided an added impetus for domestic retailers to push the ingenuity of store formats and the merchandising mix, which is great for consumers and retail venues. The arrival of international brands has also made us focus more on the right long-term retail mix for our centres.

There is a common understanding that for retail venues to thrive, the in-centre, in-store and digital experience must be exceptional and we are currently road-testing our digital loyalty program - an app for shoppers visiting Hammerson centres and websites - with retailers, so they reap as much of the benefit from it as possible.

Jeremy Collins

Property director at department store group John Lewis

Jeremy Collins

The dynamic between landlords and tenants is definitely evolving. With online and mobile technology driving rapid change in the retail industry, retailers and landlords are having to work more collaboratively to ensure success.

Both parties will always have their own requirements and drivers, although I believe there is a genuine desire from both landlords and tenants to work together.

We are enjoying very open and collaborative dialogues with the majority of our landlords. There is a growing recognition of retail tenants not only as occupiers, but more as partners, to create sustainable retail destinations and places.

With the continued polarisation towards prime retail locations, there are fewer dominant destinations. The relationship between landlords and retail tenants will need to become more collaborative and cognisant of each others’ business needs and objectives - it has to move away from the typical landlord and tenant relationship, in which the tenants just pay the bills.

Tom Carlton

Retail research specialist at landlord Legal & General Property

Tom Carlton

The retail sector has gone through mass consolidation over the past few years, with retailers closing stores either through conventional lease expirations or - in more extreme cases - the administration process.

As a landlord, Legal & General Property (LGP) has responded to this by taking a proactive stance to asset management, in order to sustain occupancy levels and rental income throughout this period. This includes launching a new initiative to communicate directly with retailers.

Retail underpins a significant amount of the assets LGP manages and therefore understanding market trends, covenants and trading performance at macro and micro levels has proven key to maintaining income. A close relationship helps us to better understand each retailers’ business, which in turn enables us to identify any asset management opportunities or address any potential problems at an early stage. This extends beyond the point of sale and we also have significant expertise in logistics, allowing us to understand the supply chains of our tenants.

From an investment perspective, a focus on assets where tenants are achieving their target profit contributions remains paramount. This process begins with the relationship between landlord and tenant.

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