Are pop-up shops the future for our high street?
The UK has had little choice but to become a nation of online shoppers during the Covid-19 pandemic, but with restrictions set to ease on 12 April and non-essential retail reopening, we consider what the future is likely to look like for our high street.
The last few years have been a very unsettling and uncertain time for high street businesses and recently we have seen the demise of some of the biggest brands – from Poundworld and Toys R Us to Debenhams and Topshop. This, however, is a topic that has been in the headlines since the closure of Woolworths back in 2008 and pop-up operations have typically assisted with rejuvenating the high street. So, can they do it again?
What is a pop-up shop?
Simply put, a pop-up is a ‘here today, gone tomorrow’ shop that can sell anything. While some might be in place from three days to three months (or longer), others will only be seasonal. Pop-ups certainly are proving popular for both new and existing businesses. For new entrants they provide an opportunity to connect to new customers, to collaborate with other small businesses, launch or test new products, and offer a limited (and thereby selective) window of opportunity for their merchandise to be sampled.
The pop-up option is also popular with existing online retail businesses, as they enable them to seduce existing and potential new customers with a ‘real life’ opportunity to see or try on merchandise in the flesh, without denying customers the chance to buy online and in their own time. In both cases, the main advantage is to limit costs and risk for the tenant.
From a landlord’s perspective, a pop-up shop means the property is not empty, rental income is coming in (which may include a contribution to business rates, outgoings, insurance etc.) and the property is seen trading and (hopefully) obtaining footfall. If structured properly, pop-up operations also give the landlord flexibility by allowing them to reclaim the property without warning if a long-term tenant appears.
So how best to document the pop-up?
A short fixed term lease with a rolling break clause is one way to make a property available to a pop-up shop, backed up with exclusion documents if the lease is for six months or more. Although one of the objectives of the pop-up is often a ‘best of both worlds’ arrangement, prudent landlords will not want to inadvertently give a pop-up tenant security of tenure. The pop-up lease will need to include provisions concerning the term, length, rent, outgoings, VAT position, repair, alienation and responsibility for statutory compliance and insurance etc.
Depending on the rent and length of the lease, the landlord may decide to agree an all-inclusive rent and to ask that it all be paid upfront. This keeps things simple for both parties. Security for non-payment of rent and/or breaches can also be covered by asking for a rent deposit and/or the inclusion of a guarantor.
With many bigger brands reducing their presence on the high street, many commercial landlords are turning to popup shops for rental income.
The pop-up model appeals to both new businesses seeking to reach new customers and established online businesses wanting to add to their customer experience. The increasingly diverse nature of pop-up tenants (including international ones like the Big Baller Brand) suggests that the pop-up shop may be here to stay.
In the short term, pop-ups will encourage footfall and presence, as well as affording landlords some income. But ultimately, they’re unlikely to provide a long-term solution to the demise of the high street on their own. This will require a much more holistic approach, with both landlords and tenants reacting flexibly to changing consumer habits.
While it’s likely to be some time before we have pop-up malls in most town centres, what is clear is that both retailers and shoppers alike are seeking different retail experiences. By its temporary nature, the pop-up shop model can lead to a more diverse and eclectic mix of merchandise, creating welcome commercial stability for landlords at a time of major retail volatility.
For more information contact our Commercial Property department on 01603 677077 or email our Head of Department, Protima Sikdar-Wood, on firstname.lastname@example.org