Retailers will not be able to sublet their shops in many of the major shopping centres opening this year, as landlords seek to stamp out the practice.
Landlords have drawn up leases forbidding subletting at several new schemes, including Westfield’s White City development, Grosvenor’s Liverpool One scheme and Capital Shopping Centres’ Eldon Square centre in Newcastle.
Subletting has proved invaluable for retailers to cut down on losses when a unit becomes untenable. DSGi property asset director Mark Feltham said: “Subletting is essential for a business. It’s important for an occupier to be able to sublet in case their business model changes. But landlords can be quite draconian and they try to control everything that goes on in a centre.”
Landlords, however, have a different view on subletting because they believe it can lead to lower quality retailers taking the space, affecting the value of their schemes. Landlords have traditionally been willing to allow subletting provided the landlord gave consent.
A spokesman for Westfield said: “We like to preserve the tenant mix and if you allow subletting indiscriminately you can’t control that.”
Grosvenor head of leasing Neil Barber said the shift away from subletting is down to landlords wanting to have more power over the types of retailer coming into their scheme.
He said: “A retailer can always sell their lease to someone else. We want to keep control over our tenant mix and, when a retailer sublets, it is much harder to do that. When a retailer comes into a centre, they expect the landlord to act in everyone’s best interest and that means not allowing certain types of retailers in.”
Capital Shopping Centres declined to comment.
With the changes to the empty property rate relief laws coming into effect in April, retailers will be under increasing pressure to keep a unit occupied, even if it has become unworkable. The growing trend of preventing subletting in a lease will mean less flexibility to retailers occupying units in the new developments.
No comments yet