Thursday 25 August 2011

Flexirents in the High Street, New Study

According to a new study from the Investment Property Databank, independent retailers are seeing increasingly flexible leases and a rent drop by a third (in real terms) over the past two decades.
Key findings from the IPD include:
-Average lease length of 5.7 years;
-Significant increases in break clauses ‘as retailers look to hedge against economic uncertainty’;
-34 per cent of new leases for High Street shops have a break clause, up from 3.9 per cent in 1999.
-Retailers have an average ‘rent free’ period of ten-months on a rent-weighted basis;
-The separate IPD data on standard shop rents shows that while inflation has risen by 94 per cent since 1989, rents for standard shops have only risen by 24 per cent, and in real terms fallen by 37 per cent.

“The issues facing our High Streets are extremely complex with recession, structural changes caused by the internet and consumer preference all in play,” said Liz Peace, chief executive of the British Property Federation. “In such times of change it is important that leases adapt.”

The traditional ‘institutional lease’, i.e. 20 years plus, with upward only rent reviews and no breaks, was inconsistent with many retailers’ needs.
With this barrier removed, independent retailers now need to up their game to match multiples processes, or lose the lot…

No comments: