Shops and restaurants are closed but the retail and leisure real estate sector has not been idle.

Browsing in physical shops (touch and feel before you buy), eating freshly baked pizza in a restaurant (not from a damp delivery box) and having foaming beer from a tap (in the company of human beings from other households). Such simple pleasures but so sorely missed.

The pent-up demand for socialising and getting back into the physical world could see a bumper summer ahead. While we can still only speculate, the swiftness, and apparent effectiveness, of the vaccination programme in the UK brings hope to the sector.

And the world of retail and leisure real estate has not been idle. It has been evolving:

What’s changed in retail?

Retail property is still being traded in volume as a viable investment asset. At the higher end, appetite for well-positioned city centre properties occupied by Covid resilient retailers (pharmacies, grocery retailers, post offices and other essential retail) remains strong. Elsewhere we are seeing high levels of activity in the virtual auction rooms with smaller investors looking for retail units in provincial towns.

Re-gearing (for both the short and longer term) of occupational retail and leisure leases has remained an ongoing area of focus across the last 12 months. As we see Covid measures aimed at helping tenants weather the current storm extended out by governments yet again, negotiations between landlords and tenants will continue for some time yet.

We are also seeing significant new leasing activity (particularly in the leisure sphere). Vacant space, or space previously occupied by retreating national operators, is being taken up by more local operators, new market entrants, fresh brands looking to expand and existing heavy weights testing new concepts.  All of this could mean that our shopping centres and city streets are reawakening with a new, more vibrant line up.

We are even seeing some of the most iconic retail and leisure locations in our cities changing hands.  With a host of big-name occupiers swept away by insolvency and CVAs rarely available opportunities are opening up. Although the huge gaps left by the likes of Debenhams will remain a challenge.

The new retail rulebook

The CVA will forever split opinion, but there is no doubt that latterly landlords have sought to take back control. Initially stunned or infuriated by CVAs, landlords have adapted. We are now seeing CVA affected leases terminated by bold landlords who have either found new occupiers or are betting on securing better terms with the incumbent outside of the CVA.

More broadly, we are also seeing evidence of the new rulebook in retail and leisure leasing being put into action. There are certainly more turnover rent arrangements being agreed than ever before. After a period of market indecision, we have also seen landlords accept that Covid clauses will be the norm - at least in the short term.

Evolution rather then revolution?

The big expectation arising out of the pandemic has been a revolution in leasing practices. There is still a concern however, that after so much talk many landlords (and tenants) are still unwilling, or perhaps, as yet, unable, to properly embrace the level of collaboration required to see such change take route.

The short-term flexible leasing model that could be the key to future success in retail is still a challenge for property investors faced with the expectations of funders and the UK valuation system that favours long leases with fixed income.

For now, the priority will be getting doors open and the public back into our cities.

The comeback will however, only be a true success for retail and leisure if the fresh understanding between landlords and tenants gained over the last 12 months is swiftly put into practice.