CACI, the consumer and location intelligence specialist, has launched a data driven, objective model to help landlords and retailers agree new commercial lease terms. In recognition of the breakdown of the traditional leasing and valuation model and the opposing positions adopted in the industry as a result of coronavirus and the government’s response, CACI is championing a new, more open and balanced approach to the commercial relationship.
The new lease model considers the holistic value of a store, its ‘halo’, in driving retailer performance. Developed jointly by CACI’s owners’ and occupiers’ teams in partnership with clients, CACI’s approach is to take a collaborative, transparent position in which a store is valued for the role it plays in an omnichannel transactional relationship between a brand and consumer. In CACI’s new model, the store’s worth is based on its ability to deliver an engaged footfall, to connect the brand with the consumer, and to unlock consumer spend.
Key is the use of data, with CACI analysing information from the tenant and landlord independently to assess store performance. The methodology takes an objective view, driven by consumer behaviour, rather than the entrenched, opposing positions traditionally found in relationships between landlords and tenants.
The evaluation completed by CACI makes it easier to determine rental levels, the form in which they are paid, and what rent is paying for. In turn, this will assist in determining the true value of assets.
Alex McCulloch, Director of CACI, said: “In many instances, the relationship between landlord and tenant was deteriorating before the onset of coronavirus, but the pandemic has accelerated the breakdown of the old model. The current position, with each side working against one another, rather than with, is unsustainable as brands and bricks and mortar need one another to thrive, least not survive.
“CACI’s new lease model is a solution to the significant challenges facing the sector as it rebuilds. Across the industry we have recognised a lot of movement towards turnover models, but this is not a long-term solution; this approach does not value the multi-faceted role of the store and will mean the start of a downward trajectory for many businesses.
“Instead our approach includes the value of store turnover, but also recognises the role of the store in influencing online behaviours and the quality of footfall a centre can deliver – it is a model which mirrors the shared risk both parties must take on but better values the shared reward.”
Chris Thompson, Director of Retail at CACI added: “This new model reflects the new consumer reality and is needed in a post-covid 19 world where visitation in many centres is down over 40%, and customer behaviour is rapidly changing; and with it the role of the store.
“Retailers need to reduce base rent, and fast. By placing a greater proportion of the lease value on the store performance across all channels our approach can, for the first time, give a neutral independent view on what true store performance is across all channels, and accurately value a store based on how it connects a brand with its customers.”
The launch of the new lease model follows the publication of CACI’s latest study of consumer sentiment as a result of coronavirus, with the company releasing a report on 3 August detailing a number of significant changes in consumer behaviour. The report also identifies a number of ways in which landlords and brands need to work together to rebuild consumer confidence and loyalty. A copy of the full report is available on request.