The shopping centre owner will pilot its new lease approach at Union Square centre in Aberdeen, with a view to converting all leases by 2023.
Hammerson has revealed a new approach to its leases in the UK, which will see it offer retailers shorter contracts and do away with traditional rent review systems.
The new approach focuses on four key areas: more flexible leases; rebased rents at more affordable levels; replacing the existing rent-review system with an index and an “omnichannel top-up element”.
The retail property company will trial the new approach at its Union Square centre in Aberdeen. If successful, it plans to roll out the scheme across its entire portfolio.
Hammerson UK and Ireland managing director Mark Bourgeois commented: “The lease structure in the UK particularly has not been fit for purpose for some time. Retailers themselves are loud and clear in telling us that change is required, and a lot of deals that we’ve been doing over the past year or so have had elements of what we’ve now announced.”
More flexible leases could take a similar approach to continental Europe with options of three, six, and nine-year lease breaks. Mark Bourgeois explained: “This enables the tenant to de-risk their position as, if the store is not trading well, they can exit. Similarly, as a landlord, we can make sure we’ve always got the optimal brand mix. It gives us the stability to change people in and out, rather than waiting 15 or 20 years to do so.”
Hammerson intends to re-base its rent with reference to “the affordable operating margin structure of that particular business,” and is expecting that the change will bring a 15% reduction in current rent levels.
The introduction of an “omnichannel top-up element” is designed to recognise the changing role of a store in a retailer’s business and could include linking rent payments to click-and-collect sales to ensure a share in internet revenue.
The landlord expects all leases to be converted by 2023.