The government’s plans to give councils new powers to extend Sunday opening hours, with effect from autumn 2016, could lead to a two-tier commercial property market and bring significant uncertainty for retailers.
The changes, which will be introduced as amendments to the Enterprise Bill, will allow councils to identify specific ‘zones’ where Sunday trading will be allowed without the current restrictions (changes will only apply to shops of more than 3,000 square feet). The intention is that councils will choose to use their new powers to boost trading in high street and city centre areas, but smaller retailers are concerned that they could also nominate out-of-town retail parks.
For some retailers, extending Sunday trading could have a significant impact; forcing them to find extra staff and increasing their overheads, without any certainty of an improvement in trading figures. Retailers with multiple sites could also find that councils in different parts of the country take a different approach and this could make it difficult to plan ahead.
Adding to the uncertainty, it is possible that extending Sunday trading in some areas could lead to a two-tier commercial property market whereby properties inside the zone attract a higher rent than those outside. Retailers inside the zone may be concerned that this could lead to rent increases at the next rent review or on renewal. Furthermore, if their lease contains a ‘keep open’ clause which gives the landlord discretion over the required opening hours then in theory they could be forced to comply or risk being found in breach of the lease.
For some smaller high street retailers currently located near to an out of town retail park with larger competitors, the changes could also have a negative effect on their trading performance. For example, they could face increased competition from larger out of town retailers within newly created zones. For this reason, all tenants should carry out a location review at the earliest possible opportunity to gauge any potential impact and consider whether relocation is a feasible or attractive option.
As well as checking their own leases for ‘keep open’ clauses, some supermarkets or departments stores with concessions on their premises may need to check the wording of the agreements they have with these concessionaires. If there is no ‘keep open’ clause in these agreements, the landlord may not be able to oblige the concession to stay open on Sundays and this could potentially create a less attractive offering for customers.
At the moment, there is still considerable uncertainty surrounding the changes and retailers will find it difficult to plan ahead until they know more about where the zones will be and how they might impact on their business. In the longer term, the emergence of a two-tier commercial property market could end up costing some retailers dearly.
Frances Proctor is an associate and retail real estate specialist at Shakespeare Martineau