Too many landlords stuck in a bygone age on retail rents

22 December 2010

There has been too little progress on rent reform which should allow retailers to switch away from the archaic practice of quarterly upfront payments.

The British Retail Consortium’s (BRC) second annual Monthly Rents Survey shows modest improvement in some aspects of the rental regime but deterioration in others. The figures are being published today (Wednesday), just before the next traditional quarterly payment date - or Quarter Day - which falls on 25 December.

The BRC members who took part in the survey occupy nearly 13,400 individual stores and are responsible for 34 per cent of retail turnover. It shows progress on increasing the proportion of property on monthly rental terms has stalled.

Last year the BRC found the proportion of property leases on monthly terms had risen from three per cent to 12 per cent over the previous two years (between Jan 08 and Dec 09). This new survey shows that in December 2010 that figure is still 12 per cent, although the proportion of those where the agreement is permanent has risen to two thirds.

The BRC has long argued that landlords should offer the option of monthly terms as a matter of principle not simply as a response to difficult economic conditions.

Retailers were more successful at achieving monthly terms when leases came up for renewal than in the five-yearly rent review process. Monthly rents were secured 48 per cent of the time at lease renewal but only six per cent of the time at rent reviews. Both figures are down compared with last year’s survey (70 per cent on lease renewals, 27 per cent on rent reviews).

The BRC has been campaigning for wider availability of monthly rents for four years, condemning quarterly terms as a throwback to a bygone era. The recession has made the case for change even clearer. Monthly payments are easier for retailers to budget for in difficult times.

Stephen Robertson, British Retail Consortium Director General, said: “While it’s clear that some landlords have moved a long way on offering retailers a more flexible rents regime, there’s a significant proportion that have not. Some retailers have even told us they’ve had a hostile reaction when they’ve tried to renegotiate rental terms.

“Quarterly rental payments are a throwback to a bygone age. Such an anomaly has no place in the age of the internet. Modern banking practices make monthly payments easy to process and they are the norm in virtually all other areas of business.

“The best landlords recognise that it’s in their own interests to have their properties occupied by thriving businesses and are showing a willingness to work with tenants. Monthly rental terms can help achieve that by easing cash flow pressures. More should be willing to offer this option.”

Notes:

A full version of the BRC’s Monthly Rent Snapshot Survey is available from

http://www.brc.org.uk/downloads/2010_Monthly_Rents_Survey.ppt

15 major BRC member retailers took part in the survey, representing 13,393 individual premises and 34 per cent of retail sales

The survey was carried out between 23 November and 11 December 2010

Quarterly rents are traditionally paid on the four quarter days each year that mark the beginning of religious festivals. The next traditional quarter day in England and Wales after Christmas Day is 25 March 2011 (in some modern leases 1 April)

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