Retail Tenancies (Base-Build)

Retail tenancies are the shops, food outlets, gyms and service premises let to tenants in shopping centres, high streets, office podiums and mixed-use buildings. As a functional space, a retail tenancy is judged on whether the base building provides what the current and likely future tenants need: the right shell, frontage and depth, and service connections for power, water, drainage, grease waste, exhaust, gas and air conditioning. The landlord usually provides the shell and service stubs; the tenant fits out within it and must make good at lease end. Many problems arise where that boundary is unclear or where the base building was set up for a different kind of tenant.

The retail mix has shifted toward food, health, gyms and services, which need more power, exhaust, grease waste, water and structural capacity than the fashion shops many centres were designed around. Tenancies without these provisions are harder to let.

What shortens fitness for purpose:

• Changes in tenant mix, especially toward food and fitness, which need services the tenancy lacks.
• Repeated fit-outs that penetrate demising walls and alter fire services.
• Poor make-good that leaves services, ceilings and floors in poor order for the next tenant.
• Water damage from tenant equipment and leaks.

Service shortfalls for the tenant type

A tenancy without a kitchen exhaust riser, grease waste connection, adequate power or water cannot take a food tenant, and retrofitting these through floors above, roofs or common areas is costly and sometimes impossible. Gyms need structural capacity and acoustic separation; medical tenants need specialised services. The lack of provisions shows up as vacancy and lower rents.

Fire separation and services after fit-outs

Each fit-out penetrates demising walls and ceilings for services, relocates sprinkler heads and detectors, and changes layouts. Fire separation between tenancies and from common areas degrades unless every fit-out is checked; sprinkler and detection coverage may not follow the new layout.

Leaks and water damage

Food tenancies, salons and gyms use water heavily; leaking equipment, floor wastes and wet floors damage the slab, adjacent tenancies and floors below.

Grease, odour and exhaust

Food tenancies without adequate grease treatment block drains; inadequate exhaust spreads odour into malls and neighbouring premises and causes complaints from residents in mixed-use buildings.

Make-good failures

Tenants leaving without proper make-good leave behind redundant equipment, damaged floors and ceilings, capped services and altered fire services; disputes are common where lease terms are vague.

Centre-level obsolescence

Tenancies can be in good condition but in a centre or street that has lost trade. Configuration matters too: very deep, narrow tenancies, or poor frontage and visibility, are hard to let regardless of condition.

On site

• Vacant tenancies and the kinds of tenants that have left; types now trading nearby.
• Service provisions visible in shell tenancies: exhaust risers, grease waste points, power boards, condenser water connections.
• Penetrations through demising walls and ceilings; altered sprinkler heads and detectors.
• Water staining on slabs and ceilings below food tenancies.
• Odour in malls or neighbouring premises.
• Redundant equipment and damage left in vacated tenancies.

In the records

• Tenancy schedule with leases, expiries and make-good terms.
• Fit-out guides and design criteria for tenants.
• Fit-out approvals and fire services certification after each fit-out.
• Trade waste agreements for food tenants.
• Complaints about odour and leaks.
• Vacancy and leasing history.

Findings are graded by what they demand: safety (can hurt someone now), failure (failed and damaging the building), condition (distress present and progressing), lifecycle (renewal due on age and exposure), deadline (a regulator or ordinance sets the date), check (investigate before sizing works) and nil (cosmetic or stable).

A building surveyor or retail building consultant leads, with services and fire engineers and the centre's leasing team.

• Tenancy services survey: power, water, drainage, grease waste, exhaust, gas and air conditioning provision to each tenancy, against the fit-out guide and the tenant types sought.
• Fire separation and services review of a sample of tenancies and every vacant one: demising wall penetrations, sprinkler and detection coverage, egress.
• Make-good inspections at each lease end against the lease, with photographs.
• Leak and odour investigation where complaints exist.
• Leasing review: vacancy, tenant mix trends and why tenancies are hard to let.
• Lease review: base-building and tenant responsibilities, make-good and fit-out obligations.

The report should separate landlord capital, tenant obligations and market repositioning, and identify tenancies needing services upgrades to be lettable.

• Services upgrades: kitchen exhaust risers, grease waste connections, larger power supplies and condenser water, installed when tenancies are vacant and ideally for groups of tenancies at once.
• Fire separation and services rectification after each fit-out, enforced through fit-out approval and sign-off.
• Fit-out guide updated so tenants know what is provided and what they must do.
• Make-good enforcement: clear lease clauses, condition reports at entry and exit, and claims where needed.
• Reconfiguration: merging or splitting tenancies to suit demand.
• Shopfront and centre refurbishment as part of a repositioning strategy.

• Separate metering of power, water and gas to every tenancy so outgoings are recovered accurately.

Services upgrades are lump sums per tenancy or per group, often justified by higher rents from food and service tenants. Fire separation rectification is itemised. Reconfiguration is a lump sum with demolition and new demising. Make-good shortfalls are recoverable from outgoing tenants where leases allow. Centre refurbishment is a large lump-sum repositioning project.

Fire safety items are code compliance; services upgrades and reconfiguration are repositioning capital; shopfronts are lifecycle; tenant damage is recoverable.

• Australia. State retail leases legislation (for example in New South Wales and Victoria) governs disclosure, outgoings and some fit-out and make-good matters; fit-outs need approval under the National Construction Code; food premises must meet the Food Standards Code premises requirements; trade waste agreements apply to food tenants.
• United Kingdom. Fit-outs need building regulations approval; food premises must meet food hygiene regulations and local authority requirements for extraction and odour; dilapidations practice governs lease-end obligations; planning use classes affect which tenants can trade.
• United States. Tenant improvements need permits under the International Building Code (mercantile occupancy); food establishments follow state health codes based on the FDA Food Code; the 2010 ADA Standards apply to public accommodations.

Mixed-use buildings add residential neighbours, so odour, noise and hours conditions in planning approvals often constrain food and entertainment tenants in all three countries.

• Tenancy schedule with leases, expiries and make-good terms.
• Fit-out guide and tenant design criteria.
• Services provision schedule per tenancy.
• Fit-out approvals and fire services certificates after each fit-out.
• Trade waste agreements and odour complaints.
• Vacancy history and leasing agent feedback.
• Make-good condition reports.

• Planning conditions on uses, hours and extraction.