Stephen Hodgson, CEO and Commercial Property Specialist at Law Firm Marsden Rawsthorn LLP, looks ahead to 2010.
At the end of 2009 the Marsden Rawsthorn Commercial Property Team negotiated the lease on one of Preston City Centre’s largest single letting units and the site of the former Woolworths store. The new tenant, Next, signed a 15 year lease, demonstrating real long term commitment to the High Street.
15 years is a long time in Retail. So was Next's decision unfounded optimism or sensible business practice?
Next knows the high street better than most and is acutely aware that prime retail sites don't come on the market every day or even every year. In a sense they are capitalising on the opportunity created by the adversities of the current climate and the predicament those operators who lack financial strength find themselves in. In other words the retail equivalent of "dog eat dog".
They’re not alone. For operators who have managed to sustain performance and crucially their cashflow, the market represents a land of opportunity. It's a tenants' market currently and there are bargains to be sought. The landlord driven market of 18 months ago seems a distant memory as tenants dictate terms in return for occupancy, from rent free periods to building repairs at the landlord's cost.
Looking forward to 2010 however, the balance of power may well shift once again. The retail market is a fickle one and confidence is everything. A better than expected Christmas retail performance may drive up tenant demand and deliver greater negotiating strength into the hands of landlords. The big pension funds, who left the property market in their droves during 2009, are back on the scene keen to acquire good property sites with secure, long term tenants and this will once again change the dynamics of the commercial property market.
One thing is certain - as the weak get weaker so the strong become increasingly aware of the market opportunities created by their predicament. Like Next, there is a sound commercial case for seizing the opportunity to secure a long term property advantage.
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