The rise of pop-ups in the declining UK high street retail market: A real estate perspective

It has been widely reported that the UK’s high street continues to decline, with both small independent and large multi-chain retailers closing bricks-and-mortar stores on a daily basis¹. In 2021 alone high street giants Debenhams, Arcadia Group and Victoria’s Secret UK retreated online, closing physical stores across the UK². Yet it is interesting to see the rise of brands, known for operating in the online retail space, popping up on high streets nationwide. What is the reason behind this move towards a physical presence in a steadily declining market?

Retailers

The key advantage of a pop-up to a retailer is that it can be delivered by any retailer, anywhere, for any reason, allowing retailers to:

• harness market opportunities as and when they arise. For instance, Tesco popped up in a number of Nightingale hospitals across the UK during the COVID-19 pandemic to help NHS staff access essentials in a time of shortages³;
• test and market new products to existing customers or existing products to new customers as with Primark’s 2020 pop-up, which allowed the bricks-and-mortar giant to launch and promote its new environmentally friendly "Wellness" range⁴;
• give the impact of a physical presence without a substantial outlay. 58 Oxford Street, which operates as a pop-up department store, allows small online brands to pop up for one to four days at a time, an experience which would normally be impossible due to the risk, high overheads and fit-out costs associated with long lease commercial retail units⁵; and
• drive footfall by creating a buzz around a brand or product, using the pop-up as an extension of the brand and creating a unique and immersive consumer experience. Glossier, the online beauty brand, saw over 100,000 shoppers visiting its Covent Garden pop-up in December 2019 and January 2020 alone⁶.

While pop-ups deliver clear benefits to retailers, they do not come without potential pitfalls:

• For retailers to quickly exploit opportunities as they arise, it is crucial that internal policies can support the agility required to identify and capitalize on opportunities as they present themselves. Required lease conditions must also be pre-considered to ensure that swift lease negotiations, when taking advantage of an opportunity, do not lead to unforeseen or onerous contract conditions;
• Retailers hoping to take advantage of the “low” rents associated with pop-ups, retailers must be aware that pop-up rents in prime locations can be high. The length of the pop-up tenancy must therefore be carefully considered to ensure that the pop-up remains present for long enough to fulfil its purpose, but short enough to be cost effective. It is also important for retailers to consider how pop-up leases deal with lease extension, renewal and termination, including any force majeure events with leases expressly outlining the processes as to how such events are to be handled.

Landlords

Given the fluctuations in the commercial retail tenancy market, pop-ups also provide commercial landlords with benefits :

• Unused retail premises can be used to offer some stability to landlords and generate revenue while market fluctuations settle and longer-term tenants are found. Pop-ups also provide landlords with the opportunity to alter their previous long lease strategy and only house pop-ups on shorter leases.
• While pop-ups can market themselves as a short-term solution, landlords should consider the long-term prospects that a pop-up tenant may offers. Glossier’s Covent Garden pop-up was initially scheduled to last four months, but high footfall led to a substantial lease extension, seeing the retailer still in tenancy two years later6.
• The buzz often created by retailers when launching a pop-up is also a benefit for commercial landlords, as heavier footfall and interest over a pop-up retailer can assist landlords in promoting the retail unit and securing future, possible longer-term tenants.

While the benefits to landlords are clear, the potential pitfalls applicable to retailers, as detailed above, also apply to landlords. Additionally, landlords need to:

• consider if planning consent for a material change of use is required. The relatively new E Class for change of use provides flexibility to commercial landlords for a change of use to an indoor property. Landlords should still be mindful to a potential withdrawal of the new E Class as COVID-19 restrictions are lifted;
• ensure the correct licenses in relation to opening times and service of alcohol are in place and consider any covenants relating to the retail unit itself. As pop-ups are used to create a buzz, they often come hand-in-hand with later opening hours, service of alcohol or exciting store fronts. To ensure landlords are not caught out, licenses and covenants must be considered and reviewed.

It is evident that when implemented correctly pop-ups offer benefits to both retailers and commercial landlords in equal measure. This is driven primarily by the cost benefits to both parties and the flexibility that a pop-up can offer. It will be interesting to see if in the wake of the COVID-19 pandemic the influx of pop-ups will continue to rise while longer-term tenancies decline or, if driven by customer spending following the various lockdowns, there is a resurgence of more permanent, longer-term tenancies.

¹ https://www.bbc.co.uk/news/business-58433461
² https://www.retailresearch.org/whos-gone-bust-retail.html
³ https://www.thegrocer.co.uk/tesco/tesco-to-build-pop-up-stores-at-nhs-nightingale-hospitals/603756.article
⁴ https://www.boxpark.co.uk/news/pop-up-primark-wellness/
⁵ https://www.elle.com/uk/beauty/a28631120/glossier-pop-up-shop-london/
⁶ https://luxurylondon.co.uk/wellbeing/beauty/glossier-shop-covent-garden-london