Turnover Rent with Rupert Wood

Maria Wiedner interviewed Rupert Wood about turnover rent, this blog contains a summary of their interview.

Rupert Wood

Rupert Wood has over 25 years experience in the real estate industry, with strategic and operational experience in multiple sectors and in delivering transformative real estate solutions.

Currently an executive advisor at FitForCommerce focussing on malls and meeting places. This involves concentrating on town/city centre growth through investment in digital services, innovations and operations. Having managed around £2bn worth of property, about 4.5million square foot of gross lettable area with around 2000 tenants, Rupert is well placed to talk about turnover rent.

Turnover Rent

Rupert explains that turnover rent is where the rent payable by the tenant is calculated, either wholly or partly by the actual turnover achieved by the tenant’s business, operated out of the premises.

However, Rupert’s challenge is that this definition implies it is only the physical unit that the retailer makes sales from. Rupert would prefer the term ‘shopping centre’ as this describes the platform for operators to meet their customers and display their products, whether in store or online. Therefore a more refined definition would be ‘turnover achieved by the tenants business operating out of the shopping centre.


The whole process is complex, and needs to be tailored to each retail sector. You cannot apply the same turnover rent percentage to a grocery store and a shoe shop and that is on of the biggest challenges for the industry at present.

The calculation can be based fully on turnover or a combination of a base rent and a turnover element. Rupert has found the most common is the combination but describes the difficulty in ascertaining the different levels, the percentage of the turnover used, and at what threshold the turnover element starts to be paid. This makes the delivery of accurate data from the tenant to landlord imperative and the market has unfortunately seen a breakdown in trust.

This of course includes treatment of elements such as ‘buy online, pick up in store’ or ‘buy online and return in store’. Rupert gave an illustration to explain this issue:

Whilst dealing with a fashion retailor in a major shopping centre in the UK, they wanted to switch to a turnover rent. It was a massive challenge to try and break through how items that weren’t purchased in the store but were returned to the store were accounted for. Ultimately, if £100 was spent online and then brought back to the store, that’s £100 off the turnover of the store, therefore as a landlord you weren’t going to get the benefit of that sale, you’re actually getting a negative.

There is a lot of data available, it’s how the retailers are willing to share that data, to then contribute to understand what the turnover is out of that store.

Likewise, I think there is a landlord supply of data, of being able to demonstrate to that retailer or operator, that your shopping centre can provide the sales that they can capture. So that sharing other data about customers, the catchment area, the technology needs to be part of the digital architecture of a shopping centre.

It allows that symbiotic relationship to be improved and the trust improved and therefore the exchange of data, of understanding the real turnover or ales that come out of the shopping centre and out of that retailer is a lot more clear.


Turnover rents in theory spread the risk between landlord and tenant. Retailers want the flexibility it offers, especially in the current situation of a pandemic, but landlords need to maintain a steady cashflow to cover their costs. Rupert believe sit is incumbent upon the industry to find solutions that will satisfy both parties.

Nationwide trend or global?

Rupert describes how the system has been used in the UK for several years, it has not been accepted as a core leasing model which has led to the current debates ignited by the problems of Covid.

Some other countries have operated these sort of shorter-term leases, turnover models successfully for many years, which the investment institutional market recognises.

However, Rupert believes it is the institutions, landlords and owners who are reluctant adopters of the model due to this need to maintain a long-term income stream, stable cashflow and have the ability to pay the interest and provide the returns to investors.

The legislation governing the landlord/tenant relationship (‘The Landlord and Tenant Act 1954’) is out of date and Rupert considers obsolete, which has proved an anchor to the adoption of more progressive, flexible models. It is Rupert’s hope that the UK progresses to this more modern model.

The role of technology

Rupert considers that ecommerce and digital products can and should be captured and that landlords should benefit from the multi revenue streams that retailers are able to access out of their shopping centre. The premises drive through sales into the community and is an integral part of all these income streams.

However, this is where a fundamental shift in the relationship between retailers and operators and it will be a huge challenge until this is resolved. The current economic climate is not helping and the two parties need to work together but are seeking different goals.

In terms of ecommerce and technology, this needs to play a part in the rental income equation. Landlords need to demonstrate what they are doing to promote ecommerce in terms of digital architecture provided and retailers need to provide their experience ecommerce wise so both can combine and reach an understanding.

It is no longer as simple as calculating what has gone through the till, it has changed with online penetration (percentage of sales executed online) rising rapidly. In May 2020 in full lockdown, the online penetration was 33%, which shows that the physical space still plays a massive role.

Footfall and eyeballs

Whilst footfall is still important, it is no longer the main metric, how many eyeballs you can get into is, Rupert believes, the key metric, as online becomes more dominant in the way we live, work and play.

The ability to have the right website, apps and social media access, marketing and video content, to establish a data set to allow you to understand what is driving customer behaviour.

The challenge for the landlord is to have flexibility, to be able to change their tenant mix, put on events known to be relevant to the community, become the heart of that community. People registered to use an app could receive a welcome message, targeted offers and relevant information.

Knowledge requirement

Rupert explains how landlords need more knowledge in how retailers operate. To understand trends, such as seasonal, differences between days of the week, as well as the impact of technology.

There is a huge amount of data and it is a big challenge to cleanse the data and disseminate good business insights, customer insights, and ultimately provide the desired tenant mix in order to succeed.


The challenge in valuations in retail is complex and subjective, there has been some heavy down valuations over the last few valuation cycles and Rupert adds there are more to come.

The key issue for valuers is to start working very closely with landlords and the funding institutions, to work out what the real impact of having a greater percentage of turnover rent within an asset will be. There is no easy answer.

Rupert opines that the valuation industry was slow to understand the impact of online sales on retailers and so it has not been truly reflected in the underlying values of an asset. He believes it is incumbent upon valuers, banks, funding institutions and landlords to work out what valuation techniques should be applied to a shopping centre.

The key, if you are going to turnover rent, is to make sure the turnover information is consistent and quantifiable. Valuers need to understand and embrace this. It comes down to trust and data management.

Rupert concludes by stating that valuers cannot rely just on spreadsheets, research, data and comparable evidence, that it has become ever more complicated. They need to understand the omni channel, multi revenue streams coming out of a shopping centre and the role the shopping centre is playing in the community.