Recent news that fast-fashion retailer, Forever 21 has filed for bankruptcy protection in Canada and the United States should have come as a shock. However, the latest high street casualty is just another name pending on a growing list.
The troubles facing the UK’s retail sector are entrenched and well-publicised. Sparked by the shift to online retail, spiraling overhead costs, and the need for a facelift, the high street has well and truly lost its mojo – but is this something it can get back?
Breathing life back into the UK’s high streets is going to take more than just a rebrand – to date, every attempt to do so has failed. Creativity and innovation need to take centre stage, supported by retailers, landowners and landlords, and from the Government itself.
The ‘human’ element arguably forms the backbone of the high street’s appeal, but it is also the most difficult component to get right. To do so, lasting relationships between landlords and tenants must be built and maintained.
Trying to enable all groups to work in a more harmonious and cost-effective way can be a challenge, however, examples such as Marylebone High Street prove that it can be done. The model, headed by a single landlord who owns all freehold property along the high street itself, makes it easier for the perfect blend of independent shops and retail chains to be achieved and managed.
Additionally, there should be a focus on creating space on the high street for the community to come together. A growing demand for street food and wellbeing, supporting local businesses by introducing food stalls and farmer’s markets – as well as creating areas to socialise – could help to increase footfall, inevitably keeping the high street alive.
High street management can be made easier with the use of technology. Whilst the UK is home to a number of the world’s leading tech giants, it seems that up until now, technological advancements have bypassed the retail sector to a large extent.
In order to accurately monitor footfall, high street shops could adopt similar technology to that used in smart motorways. This information could be used as a way of measuring the most and least profitable spots on the high street, which could provide tenants with a foundation for re-negotiating more favourable rental payments when the time comes around.
Whilst this could go some way to leveling the retail playing field between chains and independents, the bricks and mortar financial costs for smaller shops – in the wake of revelations around larger retailers paying less tax – can be detrimental.
Whilst taking care not to drive the retail giants such as Amazon and Starbucks out of business, there should be a fairer way to levy tax from retailers in the UK, one which may help smaller retailers compete with the big guys.
A new type of developer that is building to rent, rather than to sell, has led to a rise in mixed-use B1 Class units. Rather than being used purely for shopping purposes, a mixed-use high street has a varied offering from residential, shopping, and leisure units.
Introducing the WeWork-style franchise model onto the high street also has the potential to alter the functionality and use of the area, as well as the type of building. Flexibility is the business buzzword of the hour. By establishing a more flexible way of working with their landlords, tenants need to begin playing an active role in enhancing the shopping experience.
Partnerships and deal-making between landlords and tenants are also key to generating necessary support to revive the high street.
Generally, there is no standard form of lease in use, which can put tenants off entering into contracts which they fear may be untenable in the long run, especially due to current turbulent economic conditions. In order to regenerate the sector, there needs to be a simple template which is flexible enough to cover all types of lease and rental agreements.
Within these agreements, restrictions for example, on disposing of a lease and sub-letting should be enforced. For example, by preventing the disposal of a lease during the first 18 months, a landlord can be guaranteed a source of income for a set period of time, without having to worry about a tenant ducking out of a lease agreement early.
On the flipside, tenants may welcome the reintroduction of turnover rents, which were once much more commonplace in the UK. This system involves linking payments directly to the financial performance of the tenants, as a fairer way to share the burden during the good and the bad times.
For landlords, they can still benefit from having an incumbent tenant, and for the retailers themselves, the lower rental payments may make it a little easier to weather the storm.
Undoubtedly, the fate of the high street depends on its ability to modernise and adapt. Whilst encouraging tenants to get creative with their retail space and savvy when it comes to land use can help to boost its appeal, ultimately, it is the financial incentives together with a strong dose of creativity that will push retailers to commit to bricks, rather than clicks.
Julian Joseph, partner and Aleena Shah, solicitor, in the London real estate team at law firm, Shakespeare Martineau LLP