Times have changed drastically in relation to the shopping habits of consumers. In turn this is having a marked effect on retailers and their property portfolios.

Not only has the growth of internet shopping been a huge phenomenon but more recently further challenges have been posed to the high street in the form of the mass move to mobile phone shopping. New mobile payment methods took the retail sector by storm last year with ApplePay allowing consumers to pay for their goods with just a touch of a finger. The attention span of shoppers is declining and people are increasingly turning to their mobile phones for shopping due to convenience and speed. Statistics have revealed that more and more people are shopping using their mobile phone, this is only set to rise as people are finding fewer reasons to shop in physical stores. 

The big advantage that the stalwart high street giants used to enjoy was the opportunity to show off their wares in beautifully displayed windows and be able to attract customers by the pure scale and range of their stock on offer. This ‘advantage’ is no longer of relevance now that consumers can browse all of the stock in the world at the click of a button. 

Is this the death of the high street department store? Commentators believe unlikely. Retailers adapt. The likes of Marks and Spencer should look at other retailers for inspiration. Selfridges is a prime example of a department store fully embracing cutting edge retail technology. In 2016 it debuted an app including a shop by Instagram functionality using self-generated content as a means to drive sales. Thus the only way for retailers to remain on the high street is to think less about price and volume and more about customer engagement. 

The likes of M&S should leverage its strong position and no doubt will continue to do so with landlords in negotiating renewals. Whilst a bleak picture does not need to be portrayed, it is clear that negotiating positions are shifting. Gone are the days of landlords (apart from in an absolute prime site) being able to demand 15 year leases without break clauses and upward only rent reviews etc. With the changing market, tenants are requiring flexibility and landlords are in a difficult position to resist this.

Large retailers are recruiting property directors not only to manage but for strategic significance. It is recognised that playing the game correctly with landlords re renewal/break dates/alternative sites/exit strategies is a key factor in driving profit.

There are also opportunities to use concessions to share the burden of rent. One would be hard placed to not enter a large traditional retail store without seeing for example a Costa present at the site. This is yet another example of retailers diversifying to stay alive and active on the high street. A classic further example of diversifying is the changing face of M&S – the development of M&S convenience stores with their high end food products available in garages in desirable locations in the country. 

Lowering expectations of landlords can also be seen. Commentary in the US illustrates how many of the traditional malls are not necessarily insisting on flagship stores but safe reliable tenants. In many ways malls are becoming more community driven centres than fashion houses. For example doctors’ surgeries are being offered positive incentives.  

Negotiating positions are shifting. It is a tough market for the high street retailer. Retailers are having to diversify due to changing markets conditions and landlords are going to have to be co-operative. It takes a “brave” landlord to risk an empty unit and all that is associated with such a unit like empty business rates.

Mike Lewis is the head of the property dispute resolution team at SA Law.