Q&A with Paul Hicks
Earlier last year, Paul Hicks and Angharad Davies joined Stuart Darlington and the retail real estate team bringing with them a number of well known retail tenant clients to add to the firm’s already impressive list of retail brands.
The team continues to perform on a par with its City and West End rivals and prides itself on providing a partner-led, first-class service to its clients, capable of meeting the needs of any retail brand. Together, the team deals with the full range of real estate transactions for our retail clients, and also provides full support to them on any property disputes or property management issues through our dedicated property litigation team.
Paul, with Angaharad, advises on a wide range of commercial property issues and has particular expertise in the retail sector, acting for a number of high street and luxury retailers on acquisitions and disposals. Here, Paul talks a little bit more about his practice and the current retail property market conditions.
Paul, you and your assistant Angharad Davies joined Davenport Lyons from Eversheds’ London office in February this year, during your time at Eversheds and since your arrival at Davenport Lyons how has the retail property market changed?
Like so many other sectors of the economy, we've seen a significant slowdown in transactional activity. Also, of course, there have been very few new retail development schemes to help galvanise the market.
Most of my retail clients have been content to sit tight on their portfolios, with their main focus being on trimming some of the less profitable stores by way of disposal, rather than embarking on any acquisition programme. The main exception is Davenport Lyons’ client Clas Ohlson (Swedish retailer) who is actively expanding into the UK.
We're also seeing some more creative lease terms than we used to, with retailers tending to opt for much shorter leases (usually just 5 years) and more flexible commercial terms (eg, all inclusive rents, or turnover rent only leases, etc).
You joined an established retail property team at Davenport Lyons. Can you describe how your experience and expertise fits in?
I've acted for a number of well known retailers over the past 20 years, including the likes of GAP, Moss Bros, Borders, John Lewis, Mexx and Armani, and I was regarded as the leading tenant lawyer in Eversheds' London office. I've always strived to push the envelope in terms of negotiating the best possible deals for my clients, and having slugged it out with all the major landlords over many years, have a good insight into what is realistically achievable. Obviously that makes my experience well suited to the existing retail client basis at Davenport Lyons.
In the current market conditions, who do you think has the upper hand in the landlord and tenant relationship?
I cannot give a generalised answer to that question, as it really does depend upon the circumstances and the location of the relevant property. Overall, tenants are in a stronger bargaining position than ever before, with demand for space being down and landlords being forced to become more receptive to tenants’ demands for more flexible lease terms and lower rents. However there are always prime trading areas where the landlords still hold sway.
Over the last 18 months have you seen an increase in any particular scenarios you are asked to advise on?
Our retail tenant clients are now being much more proactive about lease renewals, as rents are generally falling and it's to their advantage to initiate the renewal process at the earliest opportunity.
We are also seeing several attempts to re-gear existing leases (on more favourable terms to the tenant) where they are approaching the end of their contractual terms. Landlords are often agreeable, as the investment value of their interest will be enhanced by a new extended lease term.
Property is a large expense for all retailers. What can you suggest they do to reduce this cost or burden on their cash flow?
Monthly rents are very much in vogue at the moment, and obviously that very much helps cash flow. Most landlords are reasonably sympathetic to a request to switch from quarterly rents to monthly rents, although some are charging a small premium for the privilege.