Are turnover-based rents a cyclical or structural change?

One of the economic impacts of the COVID-19 pandemic has been to accelerate trends that were already underway in many property sectors, albeit at a much slower rate.  One such change has been the move towards a greater use of a turnover component to rents.

The IPF Report on Turnover-based leases found that turnover-based leases account for around 8% of all leases and about 15% within shopping centres.

Valuers, agents and owners were unanimous that turnover rents were now standard lease terms in shopping centres for some retail uses, such as fashion.

Several respondents believed that for single occupancy out-of-town and retail parks, turnover rents were temporary concessions to lease vacant units and/or a response to a restructuring (including CVA), rather than a structural shift.

Do you think turnover-based rents are cyclical or a structural change?

The summary version of the IPF Report: Turnover-based leases, the issues, drivers and challenges, a survey of best practice can be found at https://www.ipf.org.uk/resourceLibrary/turnover-based-leases-survey-of-current-practice–november-2021–at-a-glance.html