As we head towards Black Friday and the festive season, retail agent Paul Moody looks at whether retailers should be charged turnover rent on their internet sales.

Establishing the true rental value of a store within today’s digital retail environment can be complex.

Landlords want to capture all revenue streams that can be attributed to their retail assets.

Online sales can be generated by click & collect, i.e., an online order with fulfilment from the store and via the retailer’s website with delivery to the customer or to another store. Products can also be returned to a store that may have been purchased online or from another store.

The process of auditing the origin of sale attributable to a particular store can be an onerous process for a retailer, absorbing management time and cost. Invariably retailers are not set up to apportion on-line sales to a particular store.

The quid pro quo for retailers is to exclude returns generated by online sales from the stores’ turnover. Another downside for landlords is that flagship stores that are easily accessible can become a “returns store” that has an artificially negative impact on turnover.

Monitoring mobile phone data could be a way to enable landlords to plot potential sales within the stores’ catchment, albeit establishing an effective formula or mechanism that is acceptable to retailers is likely to be challenging.

The most straightforward way for retailers to mitigate online generated turnover rent is to agree a cap that limits the clawback of online sales that is documented in the lease. In the current market the balance of power rests with the retailer, so exclusion of the provision altogether is likely to prevail for the time being.