UK & Europe
UK Real Estate Insights
After months of uncertainty and sacrifice, the Government has delivered an early Christmas present to the retail sector by allowing shopkeepers to extend their opening hours in the lead up to the festive period and through January.
Whilst the safety of the public and easing of pressure on public transport remains at the forefront of the decision, the Government will be hoping that the latest relaxation of rules provides a much-needed economic boost for the sector.
Permitted opening hours are usually governed by the planning permission granted by the relevant local planning authority. However, the Government's most recent guidance encourages local councils to take a flexible approach to retailers opening beyond usual hours and dissuades them from pursuing preventative enforcement action.
This is undoubtedly a welcome announcement for retailers, but it will also be well received by property owners and investors - especially those operating leases with turnover linked rents. To help quickly and effectively navigate this latest twist in the retail industry's turbulent year, there are three key points that owners, occupiers and managing agents should consider:
The allowance to extend store opening hours is not a legislative change – instead the Government has called upon local councils to be cooperative and flexible to allow retailers to remain open as they wish. It is therefore essential for retailers and landlords seeking to take advantage of this opportunity to communicate their intention to do so to each other as soon as possible. This will be especially important where tenants, for example in mixed use developments, have separate additional restrictions on opening hours in their leases. Such additional restrictions may be there to protect residential tenants and may mean not all tenants can extend their opening hours.
Owners and occupiers will need to consider the extent to which additional opening hours are possible, the operational and management implications of facilitating the increased hours and how best to satisfy each party's requirements. There is no 'one size fits all' approach, so retail stakeholders will need to remain flexible and open to varying needs to allow all parties to fully benefit from the opportunity. For some retailers the increased wages and unguaranteed footfall will no doubt raise uncertainty over the effectiveness of opening for longer. They may conclude that operating during normal hours will actually be more profitable.
Leases of retail space within shopping centres in particular will often require tenants to cover a proportionate cost of services performed outside of the shopping centre's 'core' trading hours. In such cases, it is vital that tenants engage with their landlords as soon as possible if they intend to extend their opening hours this month.
Landlords should consider how many occupiers intend to open for additional hours and fairly apportion any extra costs between those retailers through the service charge. It is also important for landlords to quickly engage with their service providers to ensure that all necessary services, such as cleaning and security, are covered for these extended periods. Tenants should ensure that they communicate any access or servicing needs that differ from their normal arrangements.
As the Government's suggested relaxations remain at the local council's discretion, councils will retain their powers to intervene if retailers fail to uphold COVID-secure standards. It is therefore critical for any owner or occupier intending to extend their opening hours to first consider the approach being taken by their local council.
Owners and occupiers can also consider opening discussions with their local authority to formalise any permission to extend their opening hours in the longer term, as it is clear from the Government's announcements that the relaxation of these rules is intended to be temporary only.