Landlord and Tenants – Love and marriage or chalk and cheese?
Landlord and Tenants – Love and marriage or chalk and cheese?
I was fortunate enough to attend the recent Restaurant Property Advisors Society (RPAS) Question time event titled ‘Owners and Occupiers – Conflict or Harmony’. Chatham House rules applied so I don’t propose to regurgitate the night’s content; however, it was interesting to hear the cross section of opinion, with respective parties hesitant to breach the party line. The overriding message of the evening centred on the need for landlords and occupiers to develop a more ‘partnership’ style approach. While this approach is entirely sensible given the turnover rents at play, it seems to me that owners and occupies are still light years away from understanding each other's business models well enough to truly adopt this approach.
In house experts?
In an effort to understand occupiers’ needs, many landlords have taken to recruiting ‘in house experts’. These are typically professionals with little or no property expertise, but with some previous exposure to the chosen sector. While this move is admirable, it may only serve to add an unnecessary layer of bureaucracy to the acquisition and development process. I have seen first-hand how the influence of these 'experts’ has clashed with the needs of asset managers who are driving the financial aspect of the process, or more worryingly, how the ‘experts’ have little or no understanding of what makes the respective organisations 'tick’.
The property sector has always been regarded as a sociable and people orientated industry and this is something which landlords could use to their advantage over the use of inhouse expertise. I have seen an incredible shift in the mind-set of young, hungry asset managers looking to gain exposure to new concepts and align the demands of their customers (shoppers) to individual brands. Unfortunately, the majority of landlord organisations are still led by the 'old guard’ preferring to make business decisions based on an individual’s golf handicap versus what is actually relevant and right for their asset.
Agents – good, bad or ugly?
Having been an agent in a former life, I empathise with the questionable reputation agents hold, possibly due to their counterparts within the residential sector. That said, some agents do little to expel the myth that they are little more than ‘shop shifters’. I've lost count of the number of times I’ve been emailed a photograph of a property, no address, ‘intro’ in the title bar and a simple question mark in the email body and an expectation of a £25,000 fee! When did this become acceptable?
One might argue that the occupier should hold agents to account a little more, but with competition for sites hotter than ever, we have unfortunately become used to this type of behaviour. Irrespective of the market we are in, the best agents are those who make the effort to firstly understand the sector, then the individual needs of both the landlord and tenant. Our preferred agents, CWM, have spent time working in our restaurants in order to fully understand our operation and are therefore more than capable of acting on our behalf and selecting the right sites. If more agents were to aspire to strike the balance between clients’ individual needs and the sector drivers, they will be in a powerful position to really play a positive role in the marketplace.
Supply, Demand and Tenant Mix
It is very common for landlord developers to commission lengthy and (probably) expensive reports to illustrate factors such as drive time catchments, demographic profiling, sales drivers, infrastructure requirements etc but have often fallen short in really understanding what their customers want from a new scheme. Many outlet centre developers, for example, will describe their scheme as the ‘Bicester Village' of the north / south / east /west (delete as appropriate), however will often disregard the fact that it took Value Retail many years, and much patience (two luxuries most developers don’t have), to secure the tenants they required to make the scheme as strong as it is. The reality is there will only ever be one Bicester Village in the UK because the majority of the demand, from both customers and retailers comes from the mass / mid-market. It will be interesting to see the resultant tenant mix at Battersea Power Station with over 40 restaurant units to let!
The UK property industry is one of the oldest in the world and, by its nature, still driven by the principles of supply, demand and who you know. Despite the British Property Federations introduction of the Commercial Lease Code in 2007, I am yet to see any real evidence of it in practice other than a polite nod to its existence. With the property market picking up it will be good to see more young surveyors coming through and adopting a more contemporary approach to the industry and even opting for positions within client side organisations (whether retail or landlord side). It will take this shift in approach, and a hunger to learn and embrace each other’s different business processes to drive positive change in how landlords and tenants work together…this will undoubtedly reduce the need for time on the golf course!