Legal & General has launched a new commercial leasing framework for retail and leisure occupiers (flexible partnerships model), with an initial focus on turnover rent options. The flexible partnerships model marks a departure from traditional long-term leases, to a fully flexible approach that brings optionality to occupiers from start-ups all the way to superstores. With structural changes impacting the retail and leisure sectors in recent years, predominantly due to the rise of eCommerce and rapidly changing consumer expectations, the traditional leasing model and the ‘1954 Act’ is no longer fit for purpose for many occupiers. Over the past five years, retail business launches and failures have increased by 29% and in 2019, the average length of a new retail lease had fallen to under five years. Historically, landlords have taken a ‘one size fits all approach’, which in today’s fast-paced and evolving leisure and retail sectors is no longer fit for purpose. In response to sector challenges, accelerated by the coronavirus pandemic, LGIM Real Assets has developed a flexible partnerships model that will deliver optionality and be available to exist and future occupiers. This market-leading initiative aims to be UK-wide and applicable to all assets, playing a key role in supporting UK high streets by pioneering new owner and occupier partnerships.
Denz Ibrahim, Head of Retail & Futuring at LGIM Real Assets, comments: “Demonstrating our commitment to bring innovation to the real estate sector, this new flexible partnership model really sets the bar for institutional landlords. It will provide optionality to all our existing and future occupiers in how they want to partner with us, and flexibility for us around who we want to work with. Retail is not only changing through market forces but also culturally. Our role as owner is shifting from what was sole ‘the librarian’ (collecting rent, renting shops and cleaning spaces), to becoming an ‘editor’ of the space. We need to ensure we have the right content, at the right time, in the right places, to support both occupiers and consumers. Understanding these changing behaviours and having more curatorial control over our assets allows us to be on the front foot in delivering future-ready places, whilst helping our occupier whether the seismic changes impacting the retail and leisure sectors.”