Short-term leases for start-up stores

 
Tom Welsh
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FIGURES from the British Retail Consortium tell a story familiar to any casual high street visitor. As of November 2012, 11.3 per cent of all UK shops lay empty, with shopping centres laid waste by the collapse of Woolworths, Comet, and Jessops.

This isn’t exactly good news for newer retailers. The reasons behind the fall of the former giants are complex and broad – a melange of changing consumer habits, depressed disposable income, and the movement of some (but not all) purchasing online. And it’s not company specific. Some projections suggest even the most buoyant stores will look to offload a large portion of their retail portfolio in the near future.

But one resulting trend could prove useful to start-ups. According to Angela Dennis, commercial property specialist at Russell-Cooke, sluggish demand may encourage landlords to allow more flexible and innovative use of their space. “Owners often prefer premises to be used on a temporary basis, rather than left empty,” she says. If you have no trading history or want to open a pop-up shop, the economic trends may be on your side.

The benefits are clear. A temporary deal with a landlord, or a lease for under a year, could give a small business the chance to test out its market without committing to long-term legal obligations. Of course, says Dennis, you won’t be able to make substantial changes to the premises. In other words, your flexibility won’t be absolute. But it could prove cost effective.

It may take some convincing, however. Landlords will likely expect the market to pick up in the future so it’s important to offer a tangible incentive. Dennis recommends suggesting that “if all goes well, you might stay in the property for a longer period on improved terms.” Otherwise, work with a “credible adviser or introducer,” who can give the landlord certainty that you’re not a complete charlatan.

It’s best to do your homework. If you’ve never rented commercial property before, visit www.commercialleasecode.co.uk to find out best practice.

Tom Welsh is business features editor at City A.M.