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Station retail remains on track

27 October 2014 #Real Estate


As many of us will experience every day the UK’s train stations are getting busier. With more people using the often creaking infrastructure every year the result is that there is a consistent annual increase in footfall at all of the major train stations in the UK. According to Network Rail more than a staggering one billion people, on average, pass through one of their 19 managed stations every year.

The nation’s stations are an obvious choice for retailers keen to entice the passing commuter or tempt the bored traveller who might be spending more time than they had hoped on the station concourse.

But are the types of station retailers set to change? The answer is - to an extent, yes. Although there is likely to always be a desire for the multinational brands, for that late night fast food snack or the obligatory early morning coffee, consumer and landlord desires are shifting.

On the high street, consumers are increasingly in search of independent offerings and the same is true at the major transport hubs. Landlords are responding to this desire and Network Rail in particular has adjusted their retail strategy to ensure the tenant mix is such that it accommodates these requirements.

A good example of the type of retailer that fits this mould is Sourced Market. It was founded in 2007 by a former music industry executive who was tired of the poor quality food offerings at music festivals. Living close to and loving the locally sourced produce available at Borough Market he set out to take the top quality foods from the market to the masses. After concluding their redesign of the historic St Pancras station in 2009 Network Rail sensed the need for a new independent food retailer and decided to take a chance on Sourced Market. It worked. Sourced Market now serves over 500,000 customers a year and is currently looking to take on a further station unit.

Despite the obvious lure a station unit may possess there are also a number of considerations worth bearing in mind for this type of letting:

Unit size – this can obviously vary but often the spaces available fit into some very old architecture and as such can be small or awkward units. A tenant therefore needs to consider how they will operate their business effectively within such parameters, including the logistics of how their fit out will work, how they can make the best use of the space available and how to effectively service their unit.

Landlord power – stations are busy hubs with readily available customers and as such landlords have a great amount of power in choosing tenants and also negotiating landlord friendly lease terms. Often the station operator will have a standard form document and will only accept minor amendments to its terms, even if the proposed tenant is a major operator in the retail sector.

Competition for units – obviously, for the reasons we have already explored, station units tend to be very desirable and competition for the units can be high. As well as the general difficulty in convincing a landlord to lease some space, basic economics also dictates that rents are often driven up with the highest bidder securing one of these prime locations.

Fit out works – as mentioned above fit out can be difficult in station units due to the awkward location of the units. The Landlord will also be keen to have some control over the works so as not to disrupt the proper operation of the station, including the safety of station users and compliance with station regulations particularly in relation to security and anti-terrorism.

Turnover rents – landlords will often insist on a base rent with a turnover rent top-up to take advantage of the expected profitability of the station outlet.

Alienation – the landlord will be keen to protect their tenant mix at the station and so is likely to ensure that they have some control over the assignment and underletting of the occupier’s lease. This may mean an absolute prohibition on alienation or otherwise strict conditions so that the landlord may refuse consent to an assignment where the proposed assignee does not fit with the remainder of the station occupiers. Alternatively, the landlord may include a pre-emption right, whereby the tenant must give them the option to take back the lease before it is assigned to another occupier.

Security of tenure – it is likely that any station unit lease will be outside of the renewal provisions of the Landlord and Tenant Act 1954 so that the tenant will not be automatically entitled to a new lease when their tenancy expires. This allows the landlord to change the tenant, if it so wishes, at the end of the term or to negotiate a new deal with the current tenant without being constrained by the existing lease terms.

According to the Centre for Cities, London’s population has increased by over 1,000,000 people in the 10 years from 2002 to 2012 and there are no signs of this upward trend changing in the next 10 years.

London and the UK generally are in need of some major improvements to their infrastructure to cope with the increasing demands. The development of Crossrail and HS2 are two clear examples of the reaction to this need. This new and improved infrastructure will in turn attract retailers keen to turn the constant stream of travellers and commuters into customers and consumers which can only mean station retail will continue to boom.

Clarkslegal, specialist Real Estate lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Real Estate matter please contact Clarkslegal's real estate team by email at realestate@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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Simon Ralphs

Simon Ralphs
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E: SRalphs@clarkslegal.com
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