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Retailers could be discouraged from renewing leases in weaker locations, property firm warns

Out-Law News | 15 Jan 2014 | 2:27 pm | 2 min. read

Almost 80% of high street leases are due to expire in the next five years, prompting concerns that retailers may choose to close down unprofitable stores as more shoppers go online, a property firm has said.

The figures from Jones Lang LaSalle, published by the Financial Times, coincide with the publication of data showing a fall in Christmas footfall at high street shops by the British Retail Consortium (BRC).

Jones Lang La Salle's head of retail research, James Brown, said that the number of leases due to expire before 2020 reflected the 1980s trend to let shops on 25-year leases combined with the 1990s trend to let shops on 15-year leases.

"There's a concertina effect going on where a large number of those leases are coming up for expiry," he told the Financial Times. "In weaker locations, retailers could opt to just walk away."

The latest figures from industry body the BRC showed that visits to UK retailers fell by 2.4% in December when compared to visits the year before, with high streets reporting the greatest fall at 3.7% less than 2012's figures. At the same time, retail sales were up by 0.4% on a like-for-like basis compared to 2012, which the BRC's Helen Dickinson said reflected the success of "multichannel" shopping, including 'click and collect' schemes.

The trend indicates that retailers are relying less on physical stores for sales and brand recognition, but are instead trying to find "innovative" uses for them due to the increasing popularity of online shopping, Dickinson said.

"These figures highlight how the rapid evolution of multichannel is changing the face of shopping, particularly at Christmas," she said. "Rather than making multiple trips to the shops over the festive period, many of us planned ahead for our gift-buying and took advantage of retailers' investment in services like click and collect so that they could cover off their festive spending at their convenience."

"We saw in last week's sales figures that the final result was respectable overall, with multichannel the 'story of the season'. These figures similarly highlight that continuing caution and changing spending habits were central themes of Christmas trading in 2013," she said.

Retailers have struggled with the cost of business rates and quarterly rent payments since the 2008 financial crisis, despite the introduction of some measures by the Government to mitigate the cost of business rates, which are the third biggest outgoing for many small businesses after rent and staff costs. However, retail experts at Pinsent Masons, the law firm behind Out-Law.com, have previously questioned whether measures such as those announced by the Chancellor of the Exchequer as part of last month's Autumn Statement go far enough to help the industry.

Commenting on the latest figures, Andrea McIlroy-Rose of Pinsent Masons said that retailers would "all be reviewing the size and nature of their estates" after a difficult Christmas.

"Where retailers have a number of leases due to expire, location, flexible short terms, the ability to use certain stores to enhance their online arrangements and landlords that are willing to look beyond standard institutional terms will be the main determining factors in deciding which shops are retained," she said.