Ross Bailey was only 19 when he opened a pop-up shop in London selling T-shirts of the Queen’s face with a David Bowie-style stripe for the monarch’s diamond jubilee seven years ago.
“I went into it with complete naivety: I assumed you could just rent a shop for a week,” he said.
Instead he discovered that landlords wanted to sign multiyear leases with companies, not week-long deals with teenagers. No sooner did he start trading than he found himself in a row with Buckingham Palace about image rights.
But the experience became the foundation of his business, Appear Here — an online platform for short-term store rentals that has raised more than $25m of funding and boasts backers from fashion designer Diane von Furstenberg to US retail real estate giant Simon Property Group.
“Everyone was saying that . . . [bricks and mortar] retail was a thing of the past, but for me that didn’t add up,” said Mr Bailey, now 27. “I thought, maybe it’s just currently being done incorrectly.”
While much of the UK’s retail sector plunges deeper into a crisis caused by higher costs and consumers moving purchases online, Appear Here has found itself in growing demand since its 2013 launch.
Retailers are shutting stores — a net 2,481 stores disappeared from UK high streets last year, according to the Local Data Company, with closures continuing at a similar pace this year — leading landlords to seek ways to fill them quickly.
“All the trends are in our favour,” said Mr Bailey. “If you think flexible retail is irrelevant, you think retail is irrelevant.”
Appear Here works with many of the UK’s largest commercial landlords, including British Land, Landsec, Hammerson and the Grosvenor estate, and says it has done more than 10,000 deals.
Retailers and other groups — customers have included Apple, the rapper Kanye West and chocolate makers Cadbury — can rent stores in London, Paris, New York and other cities for as short as a week or as long as years. Landlords pay a fee of 15 per cent of rental income, while tenants pay a small transaction fee. “The premise was to create an Airbnb for retail,” said Mr Bailey.
Traditionally, retailers have signed store leases of 10 years or more. But analysts say the rise of short deals such as those made by Appear Here is a sign of structural changes in the market.
“We do not believe that the rise in temporary leases will of itself prove temporary; we expect short leases to become a core part of most UK malls,” said Robert Duncan, analyst at Numis, in a report on shopping centre owner Hammerson last month.
Hammerson, which runs more than £5bn of retail properties, said temporary leases lasting less than three years made up a quarter of its new deals in the first half of the year. It now has a two-strong team dedicated to managing the relationship with Appear Here.
Last year Hammerson hosted a recreation of a 1980s-style shop from the interactive Bandersnatch episode of Netflix’s Black Mirror in Birmingham to promote the series, in a deal brokered by Appear Here.
However, Hammerson says short-term deals typically tend to be at “significantly” lower rents: its temporary deals in the six months to June came in at rent levels 55 per cent below those estimated in December, according to its half-year results.
The rise of short leases also raises another problem for landlords. Valuers and lenders assign a value to property based on the level of rent, the creditworthiness of a tenant — and the length of a lease.
So if temporary leases become the norm, that will sharply cut into values, according to Mr Duncan. “If . . . these short, low-rent leases have become part of the retail landscape as we suspect, the slide in UK mall ERVs [estimated rental values] has only just begun,” he said.
Mark Bourgeois, managing director for the UK and Ireland at Hammerson, said temporary leases helped to “maintain occupancy levels and deliver a great experience for our customers. We proactively use temporary leases to trial new concepts, and to keep our destinations fresh for consumers.”
A senior figure at another big landlord, who asked not to be named, said: “It’s no secret that retail and office lease lengths have come down significantly . . . If the market is going in this direction anyway, there is no point trying to fight against it.”
Appear Here’s competitors include US-based Storefront, along with traditional property agents.
Elsewhere, Appear Here has booked small local tenants for its landlords — such as “barbers, hairdressers and CBD [cannabidiol] stores”, said Mr Bailey — along with environmental activists, political campaigns and quirky events, such as a music college reject who rented a store, installed a piano and performed Beethoven for 24 hours with his rejection letter taped to the window.
It has also heard from desperate landlords. Mr Bailey said he had been contacted by property owners seeking to “fill every store with as much crap as possible so the numbers look good”.
But he argues his deals provide a more fundamental service: injecting fresh energy into high streets and shopping centres, to keep people coming. “The only reason retail has any value is its audience,” he said. “The value on the books is irrelevant if the people are not there.”
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