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Drapers Fashion Summit: Developer calls for retailer and landlord partnership

Major retail property company Land Securities called for retailers and landlords to work together to promote turnover-based rent deals to help both groups get through the economic downturn.

Speaking at the Drapers Fashion Summit, Land Securities commercial director Ronan Faherty said that the current economic environment was an opportunity to change the way that leasing deals between landlords and tennants were agreed.

He said: "There needs to be a change in the mechanism. Our strategy has always been about growing rental income but in this market we can move turnover more into the equation. There's a great opportunity to align developers and tenants, and turnover rents is the way to do it."

However, he warned that other incentives offered to retailers which have been increasingly common in recent years may have to change as a result. "There has to be give an take so lease terms may have to go up a bit, because otherwise we can't afford to do it. There would have to be complete transparency and an open book policy on both sides. There has to be a mechanism that works for both parties."

He also said the retailer campaign for paying rents on a monthly rather than quarterly basis was not the whole story.

"We're happy to talk about that but you have to participate in a discussion about service charges and the whole process of leasing," he added.
"In the last 15 years, average leases have gone from 25 years to seven years, and there's been much more capital contributions, break clauses and rent free periods offered to tenants."

Faherty also predicted that some new retail developments that were in the pipeline would be scrapped, as oversupply of space coupled with reduced demand impacted, and that landlords and retailers would focus much more on existing space.

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