As society advances with the online revolution we see changes in how a retailer sells their product. No longer can a store’s productivity be measured by what passes through its tills as it now must factor in the full ‘halo affect’; omni-channel sales driven by a store’s physical presence. In short, the most common turnover rent model offers the tenant a discounted fixed rent or if greater, an agreed fraction of the tenant’s turnover. The tenant therefore reduces the risk of taking a lease at market rent where the shop may perform poorly, and the landlord gets a stable rent and the chance to share in the upside if the store performs well. The turnover rent model is more common in shopping centres where the tenant’s turnover information provides a true picture of trading conditions. In the past, landlords and tenants alike have been able to enjoy the benefits found in the turnover rent model with little dispute. Leisure, food and beverage aside, landlords now argue that the turnover model fails to capture the ‘halo affect’, as tenants exclude online sales from turnover rent calculations. However, tenants are keen to continue using the turnover model providing their terms are not compromised. The research is based upon face to face interviews with fourteen of the industry’s leaders. Each interview was based on the same line of questions and lasted around forty-five minutes. Different topics were discussed including supply and demand, tenant and landlord incentives, tenant mix and the evolution of retail trading techniques. The paper not only condenses some of the industry’s most influential opinions to fill the gap in knowledge, it also suggests ways in which the turnover lease can be manipulated to withstand the online revolution.
Permanent link to this resource: https://doi.org/10.24384/000505
Harper, Angus
Year: 2018
© The Author(s) Published by Oxford Brookes University