Popping to the shops

Posted on: July 15th, 2014

Pop-up shops, once the preserve of charity Christmas card and discount book retailers, are an increasingly common sight on the high street, giving first time retailers an opportunity to test the market and landlords with new tenants. Nick Leavey, Coffin Mew’s Head of Commercial Property outlines some of the benefits and pitfalls.

Landlords

Empty units cost money, particularly given liability for nondomestic business rates after three months’ vacancy. A tenant, even for a short period of time, will generate income. It is also entirely possible that a pop-up retailer may decide to take a much longer lease after testing the water.

For those larger and institutional landlords operating shopping centres and retail destinations, pop-up shops can provide added interest and increased footfall. 

But do take care. The administrative burden and costs associated with frequently changing tenants will increase. Inexperienced tenants will require more hand-holding when compared to established retailers. 

Particular care will need to be given to the lease used with pop-up retailers. A standard lease is too long and complex for a short-term retailer. If you as a landlord deal with a large number of pop-up retailers it may be appropriate to create a bespoke suite of documents that allow the speedy turnaround of tenants whilst protecting your position. Be sure that you do not inadvertently allow a pop-up tenant security of tenure, potentially giving the retailer the automatic right to renew the lease if their venture is a success.

Retailers

Pop-up shops allow first time retailers to test the market before taking the plunge into a long lease. They are also used increasingly by luxury brands, creating a unique retail experience. Rents are generally fixed for the term of your stay and will often include rates and utilities charges. If the retail venture doesn’t work as envisaged only a limited investment will be lost.

Here is our checklist for pop-up retailers:

  • What kind of lease are you being offered? Does it require a simple flat weekly rent, or does the landlord seek a percentage of turnover?
  • Does your lease include service charges, rates and utilities? These can prove expensive add-ons.
  • What does the lease say about returning the property when you move out? Are you required to return it in a clean and tidy condition or are you liable for all repairs, which could again be costly?
  • If considering a mobile unit or pop-up restaurant you will need to check local planning and licensing regulations.
  • Are you being asked to provide personal guarantees? Make sure that you understand fully the extent of your liabilities.

Nick Leavey says:

Pop-up retailing is a valuable part of many shopping centres, such as West Quay, Southampton. Visitors love the vibrancy and range of retailers pop-up shops bring and long term tenants benefit from greater footfall, and they give new retailers an easy and cost effective way to reach a larger market.