Landlords move away from traditional rent structures to ‘partnership approach'
Landlords have said a ‘partnership approach' is needed with hospitality tenants after several major London property companies turned to turnover-based rents to support struggling operators.
Julia Wilkinson, group restaurant strategy executive with Shaftesbury, said the quarterly advance model fixed rent "clearly isn't going to work in the long run, so I think landlords do have to adopt more of this partnership approach with tenants, really talk about what works with them and find a way through it".
The property company has more than 300 restaurants, cafés and bar tenants in the West End and is the main freeholder in Chinatown. It has been doing turnover-led rent deals for the past 10 years, and from September will be moving to a monthly in advance rental model.
Wilkinson said: "It sounds like a small thing, but it really does help enormously with tenants' cashflow."
She added: "What we've typically agreed has been a 50% rent concession for a period and we are talking to tenants individually about deferrals, about potentially using rent deposits. What we are not doing is insisting that the balance is paid. We are having conversations with all of our tenants to manage this process, because we completely appreciate the difficulty they've got at the moment."
Cadogan's business community fund also includes allowing rental payments to be made monthly for many commercial leases across the estate until the end of the year. The company oversees the Cadogan family's Chelsea and Knightsbridge properties, including more than 30 restaurants, bars and cafés and nine hotels, and is converting its hospitality businesses to turnover-only rent until 2021.
Chief executive Hugh Seaborn stressed the importance of safeguarding "the long-term vibrancy of the area" by protecting businesses and jobs.
He said: "They provide a lot of employment, in many cases to local people, and so we wanted to help protect these jobs within the community."
In recent weeks Capco, the Crown Estate and Cadogan have all offered struggling tenants the opportunity to move to turnover rents in some capacity.
To support business recovery, Seaborn hopes the government will extend business rates exemptions and retain the easing of regulations around alfresco dining on pavements, which he said has had "a wonderful impact", and businesses under Cadogan's umbrella have performed "very encouragingly".
Shaftesbury is looking at creating ‘enhanced shells' for new lets, by contributing to or installing equipment.
Photo: Shutterstock
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