SCMC 2016 Report: Old adversaries face to face
Published: 14 April, 2016
An SCMC panel looked at the changing face of landlord and tenant relationships, and concluded there’s still work to be done.
Andy Garbutt, business development director at Poundland, led the charge on behalf of retailers. “We are the customer, and landlords are our suppliers,” he asserted. “Some landlords like Capital & Regional, NewRiver and Ellandi understand retail. But others are coming from a more financial background and they don’t.”
And he reserved his greatest opprobrium for some London-based property professionals. “We suffer from ERVs set by agents sat in Mayfair who don’t understand the centre, don’t understand the town and don’t understand that overall occupational costs equal the service charge plus rates plus rent,” he complained. “They also don’t understand the husbandry of a centre and we end up with too many retailers competing with each other.”
BCSC president and Capital & Regional director Mark Bourgeois made the case for the defence. “Landlords are under financial constraints that can hold them back from creating the ideal environment,” he said.
But he agreed with Garbutt’s point on husbandry. “Some landlords have had to let to whoever could pay the rent,” he said, “but we need to encourage independents to create vibrancy.” He blamed the 1954 Landlord & Tenant Act as the biggest barrier to this process. “Is it reasonable to expect everyone to be paying the same rents?” he asked. “The 1954 Act encourages a race to the bottom on lease expiry if the tone of rents has been discounted to encourage independents in the centre.”
Workman partner James Taylor picked up on the same point: “It’s frustrating, it slows our management down and we’re seeing landlords doing short term licences to avoid the Act and to keep their options open for development.”
Bourgeois contrasted the comparables-based model of the 1954 Act with an affordability-based model. “We need a free, open-market negotiation based on an understanding f what a retailer can afford to pay.” He said. But Garbutt countered: “Why should I be forced to pay more because I have a good business model? I like the security of tenure of the 1954 Act, but the way shops are measured with Zone A’s and so on is just archaic.”
And One New Change general manager Charlotte Fletcher pointed out that landlords have some legitimate grievances with retailers, too. “At an operational level there’s still a lot to be done for retailers to understand why we ask certain things of them,” she said.
Poundland’s Garbutt had the last word: “Online isn’t a cycle – it’s forever. And all the leisure we’re seeing is a result of that,” he concluded. “We’re not over-developed, we’re under-demolished.”