Time for turnover?

Now that we are nearly a month into 2011, everyone in the industry is talking about retail property trends for the year to come.Everyone tends to avoid the elephant in the room though: Yes, pressure from the supermarkets are a big topic again, yes the retail “experience” will be a crucial aspect to boost your sales, but something else which does not involve the customer at first glance will have a much bigger impact on the retail sector in Britain – the ascendancy of turnover rents.

For years, this has been one of the taboo topics at every industry event and conference including last week’s BCSC Lunch Seminar on Trends in Retail Performance – with many a debate occurring between turnover rent supporters and opposers.
While the turnover rent system proves to be effective and much more flexible than the current fixed lease system and is working well in Europe, North America, Australia and the outlet sector, many landlords are still not convinced as they are afraid of change, and an erosion of base rent.

Yes, this means price valuation for shopping centres have to be rebased but in the long run turnover rents are the only way shopping centres can go if they want to be sustainable. To cling to the current archaic valuation system while keeping fixed rents will leave the British retail sector unable to compete internationally.
So, why am I talking about the arrival of the turnover rents even though nobody has adopted them yet? Because after lots of talking and no actions in the last few years, the general mood in the sector gives me hope that this year will be the year. I am convinced that turnover rents are becoming more acceptable, which will especially help secondary shopping centres and at the same time will boost schemes in prime locations with greater landlord-tenant transparency and relationships.
Right now the only question is which landlord is visionary enough to make the first step?

Christina Sandkühler, Senior Account Manager

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