Government legislation designed to force leasing flexibility but would destroy the existing balance between landlords and retailers is increasingly likely, delegates at last week's Accessible Retail Conference in London were told.
Professor Andrew Baum, of Reading University's Department of Real Estate & Planning, said: 'The market has settled for a lease structure that both sides are comfortable with.'
'What has arisen is what I would say is a fair balance,' said Baum. 'But the rent you pay doesn't exist in a vacuum.'
Changing lease terms could cause rents to rise. Equally, substituting yearly reviews for five-yearly upward-only reviews could see rents fall 18 per cent.
Unbalancing the retail property market could result in a slowdown in development and even more property being concentrated in specialist hands, as shorter leases foster more asset management initiatives. Yields on new leases would rise. 'Taking the upward-only rent review away will make the property less attractive to investors and more expensive to finance,' suggested Baum. Conversely, yields on existing leases could fall to 4.5 per cent or 5 per cent.
Baum, who helped to develop the OPRent flexible leasing pricing system in 1999, said: 'Early signs are that good information is not being sent to Government about flexibility.'
'Unfortunately, the Accessible Retail market is probably the worst sector in terms of defending the property industry against these charges of lack of flexibility,' said Baum. Landlords and retailers still prefer more traditional leases for retail warehouse units. 'The retail park market is outlying in all sorts of respects,' he added.
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