'Pop-up' shop leases soar to 40pc of new retail deals
POP-UP shops have exploded with 40pc of new retail deals done in the last 12 months being signed for terms of five years or under, and around 20pc of transactions involving terms of two years or under.
This compares to almost no agreements for these "short" terms just three years ago, Jones Lang Lasalle has said.
It represents a rapid break-out by both landlords and retail tenants from the age-old Irish long-lease system which typically seeks terms of up to three decades.
While the term "pop-up shop" describes very short-term openings in other countries, here in Ireland where long leases are still the norm, the term has come to describe shops rented out on terms of under five years.
"I'd say that if you go into any major shopping centre today, around 10pc to 15pc of the shops are on terms of under five years," said Stephen Murray, head of retail with Jones Lang Lasalle.
Landlords recently came to the conclusion that they'd rather have the units utilised with some money coming in then leave the dreaded black hole that results from an empty shop.
There's also a chance that if the market picks up, they can tempt their existing tenant into longer terms or replace them with someone more suitable. Once their short-term tenant doesn't impact on the business of other shops in a centre then the landlord is usually happy."
According to Mr Murray the sea change has resulted from a coming together of landlords and tenants on middle ground, with both seeking flexibility as trading conditions continue to remain uncertain and both parties seek to distance themselves from longer terms.
"Tenants don't know if they want to commit and landlords don't know whether they want them to stay if there's a prospect that trading conditions might improve."
The realpolitik on leases comes after a long post-bust stand-off between landlords and prospective retail tenants during which the former attempted to pry long-term leases out of tenants while the latter refused to be tied down -- especially on upwards-only lease models which were outlawed only two years ago for new agreements.
Meantime, most high street tenants continue to be tied into old upwards-only leases for more than a decade to come and can only look on jealously at new arrivals.
Michael Harrington, executive director of retail at CBRE, said: "Strictly speaking the term 'pop up' is very short term -- a week or a month -- when a brand oriented business takes over a unit for a short-term marketing initiative -- making essentially a three dimensional ad for the brand.
"Cadbury might want to take a shop for a week and wrap it in purple paper, that sort of thing.
"In Ireland, however, it's come to describe agreements of under five years. There is an element of 'suck it and see' that suits both landlord and tenant.
"In fact it's often the landlord that wants the short term so they can be secure in the knowledge that a tenant can easily be removed.
"These deals are being characterised by renunciation clauses which make tenants renounce their rights to stay and often include breaks in the short term to allow for them to be replaced if someone else comes along.
"The era of long leases is over and these much shorter agreements are all about the risk/reward dial and where both parties want to set it.
"It means that there is now a marked distinction between vacancy and availability. So while a shopping centre might appear to be fully occupied, it's probable that there are quite a few units available," he added.