Published on 11 - July - 2012
Incentives and a simple new lease aim to boost high streetA growing number of retail landlords resorted to offering incentives to help them let their premises last quarter, as demand continued to struggle.
The flexible-terms lease aims to encourage retailers back to the high street
The trend is revealed in the latest survey of the commercial market by the Royal Institute of Chartered Surveyors - which has also just launched a small business retail lease that aims to attract retailers into empty high street units.
Following a year of falling occupier demand, the last quarter saw a net balance of 24% more retail landlords offering inducement packages such as rent-free periods or financial incentives, according to RICS.
And, unsurprisingly, with interest in retail floor space falling, surveyors' expectations for future rents are downbeat: a net balance of 28% more respondents to RICS' survey thought values would continue to drop over the coming three months.
Said RICS' chief economist, Simon Rubinsohn: "It seems that ongoing economic uncertainty is continuing to take its toll on the retail sector in particular, and landlords across much of the country are having to encourage would-be occupiers in any way that they can.
"Moreover, with demand set to remain relatively downbeat, it's unlikely that the rental picture will see any significant improvement in the near term."
Against this background, RICS in collaboration with the British Retail Consortium have launched a free small business retail lease that they hope will encourage new and independent retailers into vacant high street space.
The contract aims to simplify the often complex and time-consuming process associated with commercial property leases and to allow quicker occupation of retail premises by SMEs.
The lease takes the form of an eight-page proforma and provides the tenant with fixed property costs and a clear picture of the responsibilities they are signing up to. Intended for leases of up to five years, the standalone short-term contract with no rent review offers flexible terms for occupiers, including break clauses.
"In simplifying the leasing process for landlords and small business tenants, we hope to support SMEs and provide a boost to the British high street in a time of decline," said Paul Bagust, associate director for professional groups and forums at RICS.
And at the BRC, director of business Tom Ironside, added: "The high street is a much-loved institution but it can be a tough place to trade, with property costs a significant challenge for all. Negotiating the complicated and costly process of getting the first lease for a shop is a sizeable hurdle which our lease removes.
"Shockingly, more than 11% of town centre properties are currently standing vacant. As well as assisting individual retailers this new lease will make it quicker and easier to get those empty units back into use, preventing them acting as a drag on the performance of an entire area."
The lease and explanatory notes can be downloaded from www.rics.org/smallbusinesslease.
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