There has been plenty of media coverage recently on the need for greater transparency and collaboration between owners and occupiers.
Cue the predictable, and often justified, comments online from those who have “no sympathy” for “greedy commercial landlords”.
The complete absence of concern reminds me of the amusing scene in Austin Powers that parodies the fact that thousands of henchmen die in action movies, but no one thinks of the consequences for their families.
The massive structural changes challenging the retail industry globally are putting huge pressure on operators’ margins. Property, which was once seen as a fixed cost, is now much more variable due to shorter leases and the seemingly easy option to some of a CVA.
Fundamental change to the physical fabric of our towns and cities is ultimately going to require a lot of investment
One immediate consequence of this is often falling rents, which many readers will welcome, and a resulting reduction in capital values – which are compounded by negative investor sentiment.
The immediate effect on property owners’ staff and shareholders will draw few tears from my new quarterly column’s audience. Even a plea for pity due to the wider socialisation of these problems due to the damage they will cause to everyone’s pension funds, the banking sector and local government finance is unlikely to garner much sympathy.
However, as with the henchmen’s families, there are unforeseen consequences that I would like to draw your attention to as part of a call to action to debate the much-needed real change in our industry.
Private sector is vital
Fundamental change to the physical fabric of our towns and cities is ultimately going to require a lot of investment.
While the Government’s intervention through the £675m Future High Street Fund has been uniformly welcomed, local government’s purchases in town centres have been sometimes questioned.
Encouraging though these investments are, the scale of funds required to repurpose our retail places and town centres dwarfs these interventions. The heavy lifting must come from the private sector.
Unfortunately, the private sector is voting with its wallet; investment in shopping centres has plumbed new depths for the past two years.
Together we need to look to new models close to home and to best practice abroad
Investors and lenders, who control the much-needed funds, have made it very clear to Revo that one of the major impediments to releasing money is the lack of transparency – in stark contrast to other countries around the world.
To address these concerns requires debate, deep thinking and the slaying of a few sacred cows. I’d be confident that most owners would put upward-only rent reviews and evidence-based valuations on the table for discussion, in return for greater transparency and mutual flexibility around lease renewals.
Together we need to look to new models close to home, such as the outlet industry, and to best practice abroad; there needs to be more realignment of interests between owners and occupiers.
A better way to do business
Revo is uniquely placed as an organisation that represents owners, occupiers and local authorities to help facilitate this – and a major initiative to promote this from 2019 onwards is our Owner/Occupier CEO forum.
This initiative is being chaired by a well-known retail chief executive (watch this space) and will bring together senior industry members to debate openly a better way of doing business.
I am confident that having successful and progressive senior business leaders in a room together, all committed to seeing a sustainable and successful future for retail and retail places, will foster the honest exchange of views that is required.
Not in the least to prevent Mrs R having to take the call that her husband’s business has been run over by the slow-moving steamroller that is Amazon.