New lease arrangements designed to share some of the benefit of a shop’s online sales with landlords have struggled to gain traction in the pandemic.
Retail data firm CACI and property consultancy Colliers have both developed new lease models, which they have been attempting to persuade landlords and retailers to adopt during the pandemic.
CACI’s model, which considers online sales within a store’s catchment area in arriving at a rent ‘top-up’, appeared to be attracting considerable interest from landlords by late 2020. Benson Elliot was planning to introduce it in leases at Quedam Shopping Centre in Yeovil, where tenants include Iceland, M&S and Boots.
However, the landlord – now called Pinebridge Benson Elliot following a takeover – has made no progress in implementing it, The Grocer has learned.
Another major landlord told The Grocer CACI had found the model a “hard sell” because retailers were reluctant to recognise a direct link between online transactions and the presence of a physical store. Often they lacked their own measure of a link, thanks to complexities such as separate online and store divisions within the company, the source said.
CACI director Alex McCulloch said the model had been adopted at one “prime pitch in London where an online retailer has taken a physical store”. He said CACI had “shifted to an international focus” since October 2021, leading to “detailed retailer/landlord conversations across Europe”.
He said it had not been a hard sell to either retailers or landlords, adding: “Everyone we spoke to is in agreement in principle that this is the direction of travel.
“However, as we have moved through the crisis, the business need for everyone has evolved from ‘we need to resolve this immediate short-term problem’ to ‘there is a fundamental business issue here that we need to approach strategically’.”
He said the process was “slower but has a longer-term focus”.
Colliers has also been in talks with landlords throughout the pandemic. Its model does not directly factor in online sales but instead relies on linking rent to footfall, assuming a store visit could lead to a sale either in person or online, and therefore drives value for the retailer across both channels.
Colliers retail strategy & analytics director Paddy Gamble said landlords were engaging, and in turn talking to tenants, but the model had yet to be implemented. He acknowledged progress of new lease models had “stalled a little bit” in the pandemic because “most retailers and landlords have probably been focused on other things”.
“Do I think there’s still a need for a new leasing model? Yes,” he said. “We’re in an ever-increasingly omnichannel world and the pandemic has sped that up.
“As we come out of the pandemic, as we see the effect of that increasing shift to online, people are going to be refocusing on this.
“What you will probably see is a lot more landlords investing in more technology around footfall tracking and understanding at a much more granular level what is happening across their centres, who’s visiting and going into stores. That’s the catalyst to then turning that into a new leasing model.”
No comments yet