taking stock...

2015 survey

...another look at the state of the market

Committed to the Plain English Campaign

This state of the market report has been produced by Browne Jacobson LLP in conjunction with the Property Managers Association (PMA). The survey, inelectronic form, was sent to all PMA members on 31 August 2015 and closed to respondents on 28 September 2015. No responses were permitted after this date.

The results of the survey, which are summarised in this report, havebeen compiled from the responses received. Any opinions expressed withinthe report are those of the 43 respondents and are not those ofBrowne Jacobson LLP and should not in any way be relied on as a conclusivesurvey of the retail market! We hope you find the report interesting.

Please feel free to contact us if you have any queries.

For the second year running, in conjunction with the Property Manager Association (PMA), we issued a survey to members of the PMA to canvass views on the current state of the market.

One of our new focuses this year has been omni-channel retailing. We have been interested to learn how far it is affecting you as retailer tenants and whether there have been any long-term changes to your lease arrangements.

You’ll appreciate that this survey can only be a useful tool with your input – so a big thank you to all of you who took the time to let us have a response.

The results of the survey are summarised in this report and we welcome any feedback you have on its contents.

Thank you

introduction

Sarah ParkinsonPartner, Browne Jacobson LLP

sarah.parkinson@brownejacobson.com

+44 (0)115 976 6575

your speakers today...Sarah Parkinson, Partnersarah.parkinson@brownejacobson.com

+44 (0)115 976 6575

Sarah has over 25 years' real estate experience, specialising in retail

and property development projects, and has recently been involved

in a number of high profile acquisitions, redevelopments and complex

phased relocations. Sarah has particular experience in dealing with

the effects of omnichannel retailing on lease agreements and has

spoken at a number of conferences in the UK and in Europe on this

subject.

Prior to joining the firm, Sarah worked as an in-house commercial

property lawyer at The Boots Company PLC, dealing with property

development work and acting on high profile retail schemes for Boots

The Chemists, Halfords and Boots Opticians.

Pamela Shepherd, Partnerpamela.shepherd@brownejacobson.com

+44 (0)121 237 3937

Pamela has over 20 years’ experience in pure property litigation

work specialising in all property disputes with a particular bias

for contentious landlord and tenant issues, both commercial and

residential.

Her case load includes complex dilapidations claims and high profile

opposed lease renewals, along with rent review disputes, service

charges issues and possession claims.

Her clients include both landlords and tenants and the majority of her

work is in the retail sector.

Michael Sadler, Partnermichael.sadler@brownejacobson.com

+44 (0)115 976 6599

Michael specialises in construction where he is involved in a range of

contentious and non-contentious work.

He advises clients on different forms of construction and engineering

contracts, professional appointments and warranties. He also advises

on the resolution of disputes including mediation, adjudication,

litigation and arbitration and has experience of defending and

bringing professional indemnity claims against construction

professionals.

Michael recently completed a six month secondment working in-house

with Mace Limited on both domestic and international construction

projects and tenders. Before joining the firm, Michael gained over

four years’ experience in the construction industry working as a

quantity surveyor in London on a range of projects, including the

Millennium Dome.

Suki Tonks, Associatesuki.tonks@brownejacobson.com

+44 (0)115 976 6519

Suki specialises in the retail property sector, acting for volume

retailers and international luxury brands. Her experience includes

dealing with development agreements, acquisitions (both freehold

and leasehold) and disposals of retail premises as well as offices

and warehouses.

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Just over 57% of you who responded to this survey offer click and collect/home delivery from your stores...

48%are using stores outside normal trading hours for click and collect/ home delivery

the effect of Omni-channel retailing

of you have to seek greater flexibility from your landlords to enable click and collect/home delivery from your stores

50 %

of landlords are acting reasonably in relation to these requests

70%............................................................................

of you have no problems persuading 67 %

shopping centre landlords to let you connect to their wifi.

However, 33% of you are still struggling!

Overwhelmingly 93% of you are not comfortable that the internet sales are covered in your turnover lease or you're not clear whether it is covered.

Is this good for you?

12.5% said it's

easier to get monthly rent

75%

rentalsCurrently getting monthly rentals?

20%

ra

rely

35%

som

e of

th

e ti

me

37.5

% m

ost

of

the

tim

e

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said their position is about the same as 12 months ago

...........................................................................................................................

said it's harder to

get monthly

7.5%

ne

ver

Are you seeing more turnover rents? 40+33+25+2+B

No - 40%

About the same - 33%

Yes - 25%

Less - 2%

Which would you prefer?

shorter lease with no rent review

RPI rent review

32.5% of people said...

15% of people said...

52.5% of people said...

upwards only, open market rent review

...........................................................................................................................

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of you think that your competitors are 'buying deals' in the market which is driving up rents80 %

termsWhat length of term do you prefer?

2.5%

2.5%

2.5%

15%

15%

0%

62.5%

6 - 9 years

10 years (no break)

0 - 4 years

10+ years (no break)

5 years

10+ years (with break)

10 years (with break)

...........................................................................................................................

62+15+15+5+3What type of break conditions will you accept?Payment of annual rent - 62.5%

None - 15%

Vacant posession - 15%

(specified as free of occupiers/third party interests only)

Material compliance of tenant's covenants - 5%

Vacant posession - 2.5%

(no definition)

...........................................................................................................................

Out of 12.5%

only

5% were successful

Have you had a break notice challenged in the last 12 months?

no

87.5%

yes12.5%

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How often do you challenge an uncapped service charge?

service charges

......................................

42.5% of you insist on service charge caps but may concede if the deal is right

50% only cap them sometimes, depending on the property

15.5% up

from 2014

......................................

42+30+25+3Often- 42.5%

Sometimes - 30%

Rarely - 25%

Never - 2.5%

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87.5%have not litigated a service charge dispute charge - down from 93% in 2014

65% don't think Service Charge Code of practice has any impact in practice

lease renewals

75% of you feel that

PACT is the best way to resolve lease renewals in the absence of an agreement

...........................................................................................................................

Up10% from20144

5% have used mediation in a lease renewal negotiation, and been successful...

...........................................................................................................................

dilapidations

42.5% of you have had an increase in disputes on dilapidations in the last 2 years

What is your company's strategy on dilapidations?

32.5% do the works

££

££

67.5% pay the landlord (dilapidations settlement)

Over the next five years, what do you think will be the single biggest issues for you in the market?

the market

"Premises availability"

"Rise in rent"

"Energy performance certificate/Energy Act"

"Acquisitions"

...........................................................................................................................

If you had a magic wand, what would you change in the marketplace?• Upwards/downwards rent reviews -

more transparency

• Service Charges

• Avoiding agents and dealing direct where possible

What frustrates you most about lawyers?

Communicatons Fees

Lack of commercial mind set

Delays

?

£ £

...........................................................................................................................

Would you regard any of your current or former professional advisers as genuinely working in partnership with you?

86.8% said yes

13.2% said no

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Browne Jacobson is a national firm with a track record of delivering solutions to our national and international client base. We have experience across a wide variety of sectors and a client portfolio to be proud of. We have a national reach from our offices in Birmingham, Exeter, London, Manchester and Nottingham and as the founding member of PANGEA NET, a non exclusive network of full service law firms, we are well placed to provide quality legal services to our clients with international needs.

Our 50-strong dedicated property team have extensive experience of acting for retailers and can provide innovative solutions on the full spectrum of property related issues including planning, construction, tax, property litigation and environmental matters. We advise many of the retailers with stores in shopping centres and high streets across England as well as landlords with large property portfolios, and several of our lawyers have either worked in-house with retailers or participated in secondment programmes with our clients.

We are committed to delivering excellent client service as reflected by our three star exceptional rating Investors in Customers accreditation and recent award for Excellence in Client Service at the 2014 Law Society Excellence Awards. We have a true partnership approach with our clients - our top 20 clients have remained with us for an average of 13 years each.

about usabout us

what our clients say...

"Practice co-heads Caroline Green and Sarah Parkinson at Browne Jacobson LLP have about half a century of retail experience between them."

Legal 500 2015

"Recognised for its experience in advising on a variety of matters including IP, competition, distribution, M&A and employment. Notable following of retailers and luxury sector clients."

Chambers 2016

© Browne Jacobson LLP 2015 - The information contained within this report is and shall remain the property of Browne Jacobson and the PMA. This document may not be reproduced without the prior consent of Browne Jacobson.

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