Whether it be monthly rents or upward-only rent reviews, there are always tensions between landlords and retailers. What tends to be forgotten is that retailers are often landlords too.
This point was made to me yesterday when talking to the head of one of the UK's biggest property companies. We were discussing the Commercial Landlords Accreditation Scheme (CLAS), an admirable initiative whereby major landlords have joined together to adopt a code of practice for lease negotiations with tenants.
While not the answer to all tenants’ concerns, it is a step in the right direction and means that retailers can have some certainty about how negotiations will proceed when acquiring stores.
Between them, the 34 members of the CLAS control some 400 million sq ft (35 million sq m) of property across the UK and include many of the biggest property companies and institutional investors. They also include three retailers – B&Q, Next and Travis Perkins.
This is an important step and other retailers should think about following suit. Very few significant retailers are not also landlords in some form or other – because they sublet space or maybe own property that no longer suits their requirements.
For too long, retailers have undermined their arguments for more flexible lease terms by not walking the walk themselves. For example, many agreed 25-year terms in sale-and-leaseback deals because that was the way of getting the best possible sale price.
That's changing and the type of sale and leasebacks agreed by retailers like Tesco, Sainsbury’s and Kingfisher these days allow the retailer much greater flexibility.
An important next stage is for retailers to adopt best practice when they are landlords themselves. Such a move would really strengthen their hand in the ongoing battle with landlords over lease terms. Otherwise, they leave themselves open to being accused of hypocrisy.