After years in the driving seat, the tide has turned on landlords and retailers have the whip hand. However, occupiers must remember that they need landlords too.

There is a groundswell of acceptance, both from owners and occupiers, that the existing leasing model as it has been for years now is pretty much broken, and that one of the solutions to that may be a move across the board to turnover-based rents.

In principle, I don’t think that landlords can throw their arms in the air in horror at the thought of a major tenant making the switch to turnover-based rents. That certainly is a debate, or at least discussion, which needs to be had more widely.

At the same time, any move to turnover-based rents needs to be built on the profitability and the performance of the store, not what tenants think that they can get away with paying at the time.

Certainly, the New Look proposal, for example, seems to vary the rates that they are willing to pay based on what they think the underlying rent is and that’s have-your-cake-and-eat-it behaviour. It’s like saying we will apply turnover to what works for us, but where we think that the underlying rents are lower, we’ll pay an equivalent of what the lowest rate would be. That’s not the way forward.

Any solutions involving turnover-based rents need to be reached in an open, transparent and equitable way for them to work. In order for this to work, tenants must be fully transparent with landlords. We as landlords need to fully understand the role a store plays within the wider value creation of that business. That information would include online sales. It doesn’t necessarily mean landlords should be hammered for online returns to store, for example. Which, in fairness, New Look appear not to be doing.

It needs much, much greater transparency and proper alignment of interests and a partnership. Unfortunately, 70-odd years of bad blood and often, to be fair, pretty shabby behaviour from landlords seems to be taking a while for retailers to overcome. But we need to get there damn quickly because the challenges were already huge and they’re only getting bigger.

Working for everybody

The pandemic has essentially meant that we’ve seen five years of change happen in the last three months. I suspect we’ll see that exponential level of change continue for at least the next three months.

The more foresighted of us in the industry could see something like this acceleration of existing trends coming, which meant we’ve positioned ourselves in a certain way, but there’s no point in trying to hold on to a broken model – either as owner or occupier. We need to work together to get to something that performs better for both parties.

Occupiers, though, absolutely have to start recognising the vital role that their owners and landlords play as part of their supply chain. Occupiers can get away with very aggressive behaviours due to the market conditions being fine at the time, but ultimately it has implications and ramifications. They need responsible, well-run landlords to provide and run the physical spaces that they sell from. That’s why there needs to be equity in whatever this arrangement is.

I understand why tenants are doing it. Everyone is under immense pressure and if there’s a market dislocation going on in a big part of your supply chain, it’s human nature, if not even something of a fiduciary responsibility, to try and take advantage of that. But when it happens to the extent that it compromises a big part of your supply chain, that’s not going to work for everybody.