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A Christmas list for retailers: top tips for the festive season

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20/08/2018

He’s making a list, and checking it twice. Or so the song goes. Just like the man in red, retail tenants and their landlords should be getting organised for the festive season now, so as to avoid any issues in what is generally the busiest time of the year.  Read on to ensure that you don’t miss something off your Christmas list.

Dates for the diary

The December quarter day falls on Christmas Day and many dates in a retail lease can be linked to the quarter day with the most obvious being payment of rent. Parties should, however, also consider whether any other events are triggered by this date, for example a break date or rent review.  Any notices that need to be served should be drafted and issued before the holiday period commences to ensure that dates are not missed.

Many service charge years end on 31 December and landlords need to ensure that budgets for the new service charge period are circulated well before the end of the year to ensure that advance payments continue to be received. For any tenant on a turnover rent, the figures from the December quarter are generally key figures and may also be a trigger for the annual reconciliation process.

Financial considerations

Trading during Christmas can be a make or break event for some turnover rent arrangements. Landlords need to ensure that they are fully conversant with the turnover provisions in all of their leases and that their records and spreadsheets are fully up to date in order that they can spot any early signs that a tenant’s trading is not reaching agreed thresholds.

The details of what constitutes turnover always need to be carefully considered but these are particularly important at the festive period when returns and refunds can often be higher. Landlords need to keep a close eye on returns policies to ensure that certain stores are not being used for a disproportionate number of returns which would skew figures in the tenant’s favour.  Online sales also need to be taken into account, as do ‘click and collect’ arrangements.  Any order that is either generated in store or collected from store should be included for the purpose of calculating turnover.

Christmas is one of the most important trading periods for many retail tenants, with a significant proportion of their profit being generated during this time. As such any new tenant will want to take access to their premises no later than the start of November in order that they can be open for trade in December. If a pre-Christmas access date is missed then a tenant is unlikely to want to take occupation the new year and it is imperative therefore that deadlines are adhered to.

Trading figures for Christmas are often a very good indicator of a tenant’s overall performance and landlords need to pay particular attention to tenants who they think may be experiencing difficulties as from a landlord’s perspective agreeing to either a short term reduction in rent or payment of rent on a monthly basis for a short period is likely to be preferable to leaving rent unpaid.

Late night shopping

Extended trading hours are common at Christmas and whilst these can be a blessing for consumers, they can be more problematic for retailers. Retail leases, particularly those in shopping centres, often contain keep open clauses, obliging tenants to trade during the opening hours of the centre.  Any amendments to standard trading hours need to be notified to tenants as soon as possible but, before agreeing new opening hours, landlords should check carefully whether their planning consent contains any limitation on trading hours.

Longer opening hours will also lead to additional servicing requirements and before extensions are agreed landlords need ensure that these additional demands can be met. Planning consents for retail units and shopping centres often contain restrictions on the hours during which the premises can be serviced or the size of vehicle that can be used.  Landlords should also ensure that any additional expenses they incur in relation to extended opening can be recovered via the service charge to prevent any shortfall.

Increased footfall may also necessitate more regular or additional maintenance checks which will need to be performed at agreed times in order to minimise any reduction to trade. An enhanced security provision may also be required to deal with any antisocial behaviour that arises either as a result of overcrowded stores or by customers celebrating a little too enthusiastically.

Seasonal events, promotions and pop ups

Whilst festive events and elaborate decorations create a pleasant shopping experience (and hopefully therefore increase customers’ expenditure) they also have an associated cost. Most centres and retail spaces will have an agreed marketing budget and landlords need to take care that any Christmas events, etc fall within their budget and can be recovered from tenants.

Christmas is also a favoured time for one-off promotions and pop up stores. Whilst maximising trading space may ultimately lead to increased profit, landlords need to ensure that any temporary lettings do not impinge on any exclusion zones agreed with other tenants that must therefore be kept open and unobstructed. Pop-up stores, short term lettings and new offerings must all be properly documented to ensure that the investment value of the reversion is maintained and that vacant possession can be obtained at the tend of the term.  Further detail on the subject of pop-up stores can be found in our article ‘Popping up on a high street near you’.

Walker Morris comment

Christmas is one of the busiest times of the year for retailers and customers alike. Both landlords and tenants need to ensure that they plan ahead in order to ensure that profits are maximised and issues kept to an absolute minimum so that everyone can enjoy the happiest of holidays. Should you require any advice, please get in touch.

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