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RETAILENVIRONMENT


JOHN RYAN


W


ITH the exception of a few chains, card and greetings retail is fertile independent territory. This in turn means the sector is subject to the


predations of avaricious landlords who all too frequently seem detached from the reality of what it means to pay rent, rates and staff – and still show a profi t.


But step back from all this for a moment and consider the following, when times are pretty tough for retailers across the board and in many places To Let signs are being hoisted in multiple locations on High Streets, which is better – an empty unit or one that has a tenant?


Any rational individual would say the latter, but rationality has little to do with the arcane world of property ownership and leasing agreements. The real bugbear for retailers of every hue is the upward-only lease. This is the contract that gives a landlord the right to review the amount of rent paid by a retailer on a regular basis and to raise it. And that’s exactly what happens.


Come rent review time, the landlord looks around for evidence of the latest (and highest) rent that has been paid by a retail tenant somewhere nearby and uses it as the benchmark by which the new rent is assessed. In effect, it matters little how terrible how things are, the rent will always head north. This, of course, is why it is better for a landlord to put up the price of being a tenant, or kick the existing tenant into touch, than to allow any form of reality to creep into the equation. Now let’s consider a specifi c situation back on the High Street. There’s a small strip of shops in an affl uent location just north of London’s Regents Park that currently has a number of empty units. This is a location fi lled with well-to-do types and a sprinkling of celebs – a happy hunting ground for retailers selling gifts, cards, clothes for children called Arabella and upscale cupcake shops. Cupcake emporia actually seem to predominate here for the simple reason that they are of the moment and the profi t involved in shifting a cupcake or three means paying the high rents in the area is a possibility. Yet here’s the thing. This used to


A low-rent solution


The UK’s upwards-only retail rent review culture is to blame for many ills suffered by independent store owners.


be a much more diverse destination, in terms of the retail mix, than is currently the case and the emerging retail monoculture (cafes and cupcake shops) can be laid almost entirely at the door of a rapacious landlord culture.


This is a culture that frequently prefers empty units to retail tenant occupation and opts for wait, wait and wait some more, instead of creating fl ourishing High Streets.


Making a living out of selling greetings cards is a tough task at the best of times. The price of the average basket size is low and rents are high. A business like this is fi nely balanced and relies upon reasonable mark-ups and steady volumes of trade. The problem is that when rents go up, then there is little option other than to put up the prices of the stock – at which point the tipping point may occur as shoppers begin to desert in favour of the relatively poor, but cheaper, offer in the nearby supermarket. So here’s a thought and a mild appeal – if


52 www.greetingstoday.co.uk


landlords want paying tenants in the medium to long term, then perhaps the sensible option might be thinking about keeping rents where they are so their present tenants stay in business. Otherwise more and more landlords could be


fi nding themselves in the same situation as the London location where squatters have moved into one of the empty shops. Can’t say I blame ’em really.


John Ryan is a journalist and commentator covering the retail sector, a role he has fulfi lled for more than a decade. In a previous life he was a retail buyer. T: 07710 429926 twitter: @newstores


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