White-boxed units with flexible leases – where landlords deliver generically fitted units to occupiers to meet a standard template, often on more flexible terms – are increasingly becoming a powerful tool within retail, enabling landlords to quickly and easily diversify tenant mixes whilst also offering greater affordability and flexibility.
These leases are of course not new to retail, having first risen in popularity as the trend for pop-up retail and leisure destinations took hold over the last decade. Providers like Boxpark, with its shipping container schemes, and Sook – which opened its first pop-up space in Cambridge’s Grafton Centre, on which MMX Retail advised – were among the early adopters.
But fast forward to today, and these leases are becoming increasingly mainstream with the biggest retail landlords now seeking to get in on the act across their core portfolios.
Earlier this year Grosvenor revealed its new ‘Simplified Lease’, which has been offered to tenants across its Mayfair and Belgravia portfolio – including Sook and My Wardrobe HQ – in a bid to reduce the legal and financial obstacles faced when opening stores, enabling those brands to start trading faster. LandSec has also created a suite of four different lease types to meet occupiers’ differing needs, with entry-level leases offering shorter and more flexible lease lengths and reduced upfront fit-out costs.
Post pandemic, Legal & General has also launched a four-pronged ‘flexible partnerships model’ for retail and leisure occupiers, one of which includes white-boxed units to simplify the leasing process and reduce costs.
Speaking about the new leases, Denz Ibrahim, LGIM Real Assets’ head of retail and futuring, explains: “Our role as owner is shifting from what was solely ‘the librarian’ (collecting rent, renting shops and cleaning spaces), to becoming an ‘editor’ of the space.”
He adds that “having more curatorial control over our assets allows us to be on the front foot in delivering future-ready places, whilst helping our occupiers weather the seismic changes impacting the retail and leisure sectors.”
The clear benefits to be gained, by both landlords and tenants alike, of utilising white box leases in today’s market are fourfold:
However, many retail landlords have stuck with longer, less-flexible leases for so long for a reason. They offer a greater level of certainty (which is not the case for more flexible white box leases), and this helps to define the total value of retail assets.
But trading sustainability is becoming better understood by landlords and while white box leasing undoubtedly is associated with greater risk, with this risk could come very positive returns.
The format has already been proven to work across the full spectrum of the retail and leisure sectors and keeping bricks-and-mortar expansion plans on the table and progressing quickly during the unprecedented times ahead would suit both brands and landlords.
The wider implications of this would also be felt more generally across UK high streets, helping to ease vacancy rates and speed up the revitalisation of town and city centres. If encouraged to ripple out across some of the UK’s more secondary schemes – where the same national retailers have occupied space for years creating clone town centres – could white box leasing be part of the answer to help breathe life back into these tired bricks-and-mortar spaces? Watch this white space!
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