Turnover rents: comparative valuation issues

Abstract

Turnover rents have become an accepted part of the retail property market, particularly in managed shopping centres, airports, motorway service stations and railway stations. Relates to their use for managed shopping centres. Their relative merits have been a source of debate among retailers and property professionals. However, the issue of valuation methodology for retail properties let on turnover leases has not been discussed. Examines the types of turnover lease in the UK and their investment characteristics. The limitations and problems of current valuation approaches are explored. The property market where retail turnover leases are most common ‐ the USA ‐ is also examined in order to assess whether any lessons can be learned. Concludes that turnover leases in the UK are likely to produce complex and varying income flows. Moreover, the usefulness of current valuation techniques will be limited, owing to a lack of comparables and the inherent inflexibility of the techniques themselves.