COMMENT Covid-19 has accelerated the evolution of our cities and left no stakeholder in our urban areas unaffected. However, whilst time is taken to debate and decide how our cities of tomorrow are going to work in the long-term, should we not be giving more thought to what urgently needs to be done today in order to protect what remains of our high streets?
Market disruptor and influencer policies devised by brands and businesses to inform the evolution of our high streets have been laid to waste by a natural disruptor that has brought forward the pace of change with a velocity that nobody could have foreseen. Conversations from only six months ago around how Covid-19 had fast-tracked changes in the basis of occupation of our high streets by five years already seem out of date. All stakeholders, within the shortest period of time, are left battling to protect their interests and, out of these battles, opportunities to positively plan for the future will inevitably emerge. As to whether or not it is possible, in the midst of the greatest fiscal deficit in living memory, for those opportunities to be taken is something that will continue to occupy the thoughts of the best minds (or at least those charged with requisite responsibility) for some time to come.
Immediate action needed
There is, however, a more immediate and pressing concern. The devastation wreaked by Covid-19 on our high streets is clear for all to see. The depressing sight of row upon row of empty units serves as painful testament to the cost of the last year. Those units that do remain occupied are therefore of fundamental importance to the retention of any sense of community in the immediate aftermath of the most destructive of pandemics. Lobbying and focus groups, local and national government, think tanks and local enterprise schemes will form just some of the crucial cogs in the wheel for debating the future of our high streets, cities and urban areas, as well as the basis of the “new future”. However, just as grand policies and plans are being devised and legislation debated, the immediate need to prop up our high streets and avoid further decline will, for the short-term at least, inevitably be shouldered by the investors, funders, owners and occupiers already so badly hit by the pandemic.
The diverging interests of the stakeholders in our high streets were in evidence well before the pandemic hit. The shift from traditional, upward only, periodic market rent reviews and lengthy lease terms had already begun – but at a pace that would allow the underlying asset valuation models to change and adapt without undue strain on the yields on which the institutional funds, public and private investors and pension schemes (and consumers) so heavily rely. The acceleration in the pace of change brought about by Covid-19 has undermined the stability that more measured change would have allowed. Investor landlords looking now for certainty in lease terms of sufficient length to drive a yield (any yield in certain cases) are faced with occupiers that are, understandably, looking for more agility in terms – shorter length of commitment, multiple breaks, pure turnover deals, pandemic clauses, etc. Additionally, whilst the ramifications of the emergency legislative measures brought in at haste over the last year are realised, it is interesting to consider how the deals struck in equal haste will form the narrative for the debate around the “fit for purpose” nature of the legislative framework that dictates the relationship between landlord and occupier. A debate that, like so much prior to March 2020, had begun at a measured pace but is now left trailing in the wake of the commercial necessities of the situation.
Work together
In the short-term, the majority of leases in place now will continue and Covid-19 deals will run their course. The consequences of deals made in the eye of the storm will be addressed and investors and occupiers alike will develop short to medium-term strategies for their portfolios. Budgets will be finalised, plans will be made and the process of implementation will begin. All set against a backdrop of hope for a sustained period of stability in which all businesses will be allowed to operate without undue disruption. Nobody else but those stakeholders (with support from the treasury) are going to be able to protect our high streets against whatever the next chapter brings. The mutual benefit of leasing and occupation will, almost certainly, allow investors and occupiers to strike an accord but, as the first reported case of a summary judgment for non-payment of rents arrives on our newsfeeds, the need for communication and a strong working relationship between landlords, occupiers and their respective advisers is now acutely necessary to preserve what is left of the community that is our high streets.
Ellis Gardner-Browne is a partner at Shoosmiths
