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Approach Retail Space Incentives With Caution, Legal Expert Warns

New RICS Study Reveals Tactics Used By Landlords


Retailers have been warned by corporate recovery experts at Irwin Mitchell to think carefully before agreeing to take up space which is being let on the promise of incentives, after new research showed a growing number of landlords are using such strategies.

According to the latest Royal Institution of Chartered Surveyors (RICS) UK Commercial Market Survey, a number of retail landlords are now offering rent-free periods and financial packages to potential tenants.

The study suggested that the trends have meant that retail premises have bucked overall trends with occupier demand rising in the sector.

However, Andrew Walker, a Partner and specialist in corporate recovery at Irwin Mitchell’s Leeds office, has warned companies looking at space being offered with incentives to ensure that they are careful in how they approach agreements.

He explained: “While they may appear to offer a strong way of getting new tenants into commercial property, it is an unfortunate truth that these types of incentives have also become a reason for business failure.

“We’ve seen cases in which some retailers have taken on premises for either initial rent free periods or even cash payments for issues such as shopfitting. However when this period comes to an end they then find that they cannot actually afford the rent going forward.

“This may be because a landlord seeks to recover this initial free period or cash by charging a higher-than-market rent or, quite simply, because the retailer was never going to be able a market rent in the first place.

“It is vital that businesses weigh up all of their options when it comes to taking new space, to ensure that any agreements do not leave them overstretched or in a potentially difficult position.”