Pop-up shops and restaurants are on the up! The appeal of flexible space, with availability at the drop of a hat, is easy to understand in today's fast paced society.

Businesses and entrepreneurs cannot afford to wait for lengthy lease negotiations to take place when time is money. And in the current economic climate both landlords and tenants need to think creatively to use retail space as spontaneously and innovatively as possible.

What is a retail pop-up?

Pop-up shops involve use of part of a building or a temporary structure for a short period of time. They are quick to set up and usually generate publicity which can be great for new businesses as well as benefitting the surrounding area.

A small retail space within an un-let building or an unused area in a shop is taken over for a short period of time for trade of a "limited-edition" product or range. Pop ups allow traders to take advantage of increased seasonal footfall, capitalise on major events like the Jubilee or the Olympics, or permit entrepreneurs to test the water with a new business.

Recent examples of pop-up shops include Cath Kidston's four month-only store at Heathrow Terminal 5, a temporary supper club called The Loft Project (now a permanent fixture) in East London, Orla Kierly's pop-up store open for 5 weeks in Oxford Street's John Lewis and Chanel's temporary store in Courchevel lasting just the length of the ski-season.

Even institutional investors like the Crown Estate, British Land and Hermes are buying into the idea and permitting occupiers to use space on a temporary basis.

Planning

A change in planning law has made it even easier for pop up shops to appear. From 30 May 2013, the costly process for obtaining planning for a change of use of certain properties has been relaxed.

This allows small flexible pop-up uses for a period of up to 2 years for retail, financial, restaurants, pubs, takeaways, office and leisure. In addition, no planning permission is required for any use of land or moveable structure if the use does not continue for more than 28 days in any 12 month period.

Terms of occupation

For tenants, flexibility is essential and a reduced rent is appealing. Pop-up tenants will expect little or no onerous obligations contained within the lease or licence which is signed up to. For landlords, pop-up shops provide a trendy way to fill empty space in premises and reduce business rates liability.

However, occupation of a pop-up shop will essentially be through a short form lease or licence. Prudent landlords will require the tenant to agree to its terms by signing on the dotted line before allowing a pop-up to open.

A licence arrangement is often best for both parties to reflect the short term nature of the shop, but it will depend on the type of business and commercial terms agreed. The main terms that will need to be included within any short term lease or licence will cover:-

  • payment of rent and rates,
  • rent-free period,
  • length of term,
  • permitted use and planning consent,
  • fit-out requirements,
  • repair,
  • termination of the arrangement and
  • obligations to be complied with when leaving the premises.

Quirks

There may also be more unusual terms to be included within the lease or licence when looking at the "quirky" nature of pop-up premises. For example, how do you draft a legal agreement for a pop-up shop in a tent or a freight container?

The property industry is embracing these types of high speed, temporary arrangements. Indeed, the insurance sector has taken on board the need for retail pop-ups and a specific pop-up insurance policy is available providing comprehensive cover on a very short term basis. Both landlord and tenant will want to ensure that insurance is in place before a pop-up trader opens for business.

So are pop-up shops just a way to generate PR for a brand or product? Can pop-ups genuinely improve the profitability of companies large and small? Whichever way you look at it, pop-ups are fast and fun with seemingly endless benefits for landlord, tenant and consumer alike.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.