Retailers which have seen their online revenues skyrocket during the pandemic could see their rents shoot up under a progressive new leasing model.
Under the newly proposed model, which is being explored around 50 major retail landlords, retailers’ rents would be based on in-store sales, footfall, and online sales for the first time.
According to the CACI, which devised the new model, rents would take into account footfall, boosts to online sales after a store opens, the value of items bought online and collected in store and physical sales.
It would also cover the “online halo effect”, factoring in sales made via third party couriers like Deliveroo.
Store’s will pay a base rent, then pay a ‘top up’ based on a rise in sales both in store and online in its catchment area.
Base rents will drop by a minimum of 30 per cent, meaning most tenants should not end up paying more, while rates could also drop based on low or non-relevant footfall.
Shopping centre giant Hammerson is reportedly planning to adopt this model next year, and if it proves effective it could be rolled out across the industry.
The disparity in rent and business rates paid by online focused retailers and more traditional physical stores has been a growing point of contention for some years.
Many of the industry’s leading voices have called for a new model to be introduced which levels the playing field for physical retailers, who pay far more than their pureplay counterparts like Amazon.
“We have long advocated an overhaul of leases so they reflect how consumers shop today, not as they shopped in 1954,” CACI director Alex McCulloch said.
“This means there must be a recognition that stores do far more than take money through the till and landlords and retailers need to work collaboratively to do that. The reality is that it has taken a crisis of the magnitude of Covid to bring all parties to a position in which change was possible.”