Landlords should move on lease terms

One of the key areas coming out of the current Covid crisis is the frankly terminal shock to the retail and leisure sectors. There simply has been nothing like this in history to compare it to in the modern age.

Restaurants and shops will fill up again, people are desperate for some normality as mile long queues to McDonalds’ as they open up is demonstrating. However, it could be months or even years until social distancing restrictions, both regulated and emotional, are relaxed. Restaurants can’t make money at 50% occupancy snd neither can many shops.

Equally, retail landlords are in a big fix, June rent roll is coming up and it could be a bloodbath. As the next quarter kicks in a lot of retailers will give up the pretence of trying to come back. Better to emerge with a fresh business and new rent rates than try and limp on with the accrued debt.

But the US and Europe have an answer, the answer is that lease terms move to share of turnover rather than fixed, upwards only, rents. Share of turnover, or even share of net income, will see businesses able to operate at reduced levels, but still pay some rent. Plus when the good times return, so do the rents to the landlords.

Crisis is a time for flexibility, the UK has long be afflicted by the deformities of the rent and business rates system which has ruined our high streets and many of our once thriving retail industry. With the additional burden of Amazon and now Covid the situation is dire, but the proposal above will show a way out that shares the costs appropriately between landlord and tenant.