19 August 2015

The legal aspects and implications of commercialisation in shopping centres

In July, Associate Solicitors Andrew Brockett (Commercial Property) and Helen Hill (Property Litigation) attended the International Council of Shopping Centers (ICSC)’s European Retail Property School in Frankfurt, where they presented a full-morning seminar on the legal aspects and implications of commercialisation in shopping centres to a room of European real estate managers and professionals.

Commercialisation is all about obtaining maximum ancillary income for retail landlords and shopping centre owners beyond rental income from normal tenant arrangements. It includes income generated from advertising boards, kiosks, merchandise stalls, promotional spaces, car valeting, photo booths and vending machines, etc.

Although it is the first time that this course has been offered at the ICSC Retail Property School, it was well attended – the students came from across Europe and represented companies such as IKEA, Commerz Real AG and Immofinanz.

The popularity of the topic is increasing and it is an extremely fast-growing area. While commercialisation generated around only £15m in revenues to UK shopping centres and retail destinations at the turn of the century, this figure increased to £300m in 2013, equating to a twenty-fold increase in 12 years. Additionally, footfall and ancillary statistical monitoring are all aspects that are under scrutiny, review and improvement by shopping centre owners in an effort to maximise profits.

However, whilst commercialisation usually only involves small deals over short-term arrangements, it can have some significant risks. Areas of potential problems include tenure, risk and liability for disrepair, health and safety, intellectual property, planning and environmental issues, and employment.

Indeed, it can be argued that there are more risks and issues with a simple commercialisation deal than with the core shopping centre tenancies. The seminar provided by Andrew and Helen was aptly entitled “Small Deals, Big Risks”.

Commercialisation is a booming area and is likely to develop even further over the coming years as shopping centre owners seek to increase revenue. In order to reap the benefits, the key is not only understanding the potential risks/issues but also making sure to have a clear commercialisation strategy in place.

If you have any queries regarding this area, or for further information, please contact Andrew Brockett on 0113 284 8998 or at abrockett@shulmans.co.uk, or Helen Hill on 0113 297 3770 or at hhill@shulmans.co.uk.