THE ECONOMIC downturn has accelerated a move towards more flexible leasing arrangements in shopping centres, according to Ian Middleton of UK property consultants Smith Young Partnership.

He told the a conference of the Irish Property Facilities Management Association that the standard institutional arrangement of 20- to 25-year leases with fixed rents subject to five year upwards-only rent reviews had given way to reduced terms of 5 to 10 years, reduced security of tenure and rents directly related to sales. The turnover-related rent was not a new concept, dating back as it did to the mid 1970s in the UK and well before that in the US. That said, it was still far from common in shopping centres.

Middleton said a wide variety of mechanisms were available. At one end was a pure turnover rent (a percentage of turnover with no base rent) and at the other was full open-market rental value with an additional turnover rent top-up. In between were numerous threshold arrangements and ratchets with variations in turnover rent percentages that could range anything between 2 and 20 per cent. As well as introducing an element of risk sharing and short term responsibeless/flexibility, the turnover rent arrangement encouraged greater performance orientation within centre management and was generally more attractive to foreign entrants and retail innovation.

Middleton said turnover rents tended to be a product of difficult times, they were partly a product of uncertainty yet they provided the opportunity to create situations and returns that exceeded industry benchmarks.