The Brick-and-Mortar Brand - How will landlords and tenants experience experiential retail?
As retailers increasingly pivot away from the traditional emphasis on spaces geared towards stock and sales and towards an experiential approach aimed at engaging the customers' "phygital" experience, it's likely that the landlord and tenant relationship and the traditional terms of retail leases will also experience some changes.
As John Lewis hold gardening workshops and Gibson stage live concerts in their stores, its likely that there will be a need to offer tenants spaces with wider and more versatile potential uses. Tenants will want to ensure that the permitted use both in any leases and in terms of planning reflect this and that there exists some future-proofing of the terms of use to a rapidly evolving retail landscape.
Retailers with existing spaces may look to repurpose them to reduce stock space or collaborate with other retailers to create "stores within a store". Tenants may not look optimistically on lease terms that restrict minor alterations or the grant of any short-term licenses or sub-lettings in this environment and there may be an increasing push for more flexibility.
As boundaries between the physical and online experience of retail blend, the ability for both tenants and landlords to assess the financial success of a single store and accordingly the rent are also blurred. Turnover rent models which often appear in retail leases may not always stand up to the experiential approach. Indeed, if the physical store is built to engage the online experience, it is difficult to justify the exclusion of online and click and collect sales from the calculation of turnover rent. Where the important numbers to retailers relate to footfall and dwell time, it will be interesting to see if there is a move towards an amended or alternative turnover rent model.
If you would like more information on our retail and Real Estate expertise, or your options as a landlord or tenant, please contact me or your usual Charles Russell Speechlys contact.
To lure digital shoppers away from their couches and into physical stores, retailers are heavily leaning into tangible in-store experiences that increase dwell time and build brand connections that go well beyond a transaction.
