Channel Islands

Channel-IslandsThe island of Jersey is the largest of the Channel Islands.  Although the Bailiwicks of Jersey and Guernsey are often referred to collectively as “the Channel Islands,” they are not a constitutional or political unit.  Jersey is not part of the United Kingdom nor a part of the European Union, but has a special relationship with it and is part of it in terms of the free trading of goods.

While tourism is the main driver of the economy on the smaller Channel Islands, Jersey and Guernsey have, since the 1960s, become major offshore financial centres, enabling tax “neutrality” on a similar scale to Bermuda and the Cayman Islands.

Jersey’s retail market is, by global standards, a small market place due to limited land mass, a tight planning regime and relatively small population.  Low levels of personal tax and high levels of disposable income have however led to a strong retail presence by multiple national retailers which is coupled with continued but unfulfilled demand from UK, European and US multiples.

ECONOMIC SUMMARY
ECONOMIC INDICATORS*200920102011E2012F2013F
GDP growth N/AN/AN/AN/AN/A
Consumer spending N/AN/A1.1N/AN/A
Manufacturing production N/AN/AN/AN/AN/A
Investment N/AN/AN/AN/AN/A
Unemployment rate (%) N/AN/AN/AN/AN/A
Inflation N/AN/AN/AN/AN/A
GB£/€ (average) 0.89 0.86 0.87 0.850.85
GB£/US$ (average) 0.64 0.650.620.64 0.64
Interest rates 3-month (%) N/AN/AN/AN/AN/A
Interest rates 10-year (%) N/AN/AN/AN/AN/A

NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast
Source: Oxford Economics Ltd. and Consensus Economics Inc

ECONOMIC BREAKDOWN
Population 97,857 (2011)
GDPN/A
Public sector balance N/A
Parliament States of Jersey
SovereignQueen Elizabeth II
Chief Minister Ian Gorst
Election dateOctober 2014
RETAIL SALES GROWTH:
% CHANGE ON PREVIOUS YEAR
CHANNEL ISLANDS2009201020112012F2013F
Retail VolumeN/AN/AN/AN/AN/A
Retail ValueN/AN/AN/AN/AN/A

Source: Oxford Economics Ltd.

LARGEST CITIES (2010)
CITYPOPULATION
St Helier 33,000
St Brelade 10,000

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Channel Islands: 49.216667, -2.132500

 

MAJOR DOMESTIC FOOD RETAILERS

Co-Operative Group, Marks & Spencer Simply Food, Waitrose and Iceland

MAJOR DOMESTIC non-FOOD RETAILERS

Sandpiper Group (Marks & Spencer, George, Crew Clothing, Jack Wills), Arcadia Group, New Look, Next

INTERNATIONAL RETAILERS in jersey (a selection)

Crabtree & Evelyn, Goldsmiths, Molton Brown, New Look

Food & Beverage Operators

Costa Coffee, Pasty Presto, McDonalds, Pizza Express, Coffee Republic, KFC, Bella Pasta, Pizza Hut, Starbucks,

TYPICAL HOURS
MONDAY - FRIDAYSATURDAYSUNDAY
09.00-17.3009.00-17.3010.00-16.00 stores over 200sqm,

Jersey is a small but high value market with a population of only 90,000 but above average retail spend per capita. Jersey is a mature and highly competitive retail market due to limited land mass and a tight planning regime. Consumers have traditionally been receptive to new concepts and formats. Due to additional transport costs e-commerce is not as popular as in the UK.  Linked to this, the retail property sector is also sophisticated and transparent.

Total existing stock is predominantly made up of unit stores with the exception of two department stores (de Gruchy and Voisins) and one small shopping mall.

Jersey has limited retail warehouse market opportunities.  Where these exist, the market is active and has seen increasing demand from retailers.  New space coming to the market is limited given planning restrictions.  Large supermarkets are scarce in Jersey; however, smaller Checkers Express, Channel Islands Co-Op, and Spar supermarkets are scattered all over Jersey, in locations such as Beaumont, Le Riche, St. Aubin, St. Brelade, St. Ouen and St. Peter’s Village.

E-commerce has developed more rapidly in the UK than in most other EU countries. Main contributing factors are the high level of internet penetration, high levels of credit and debit card usage and rising levels of confidence in security. Jersey follows this trend but due to higher costs and longer delivery times it is not as popular as it might be.

It is possible to enter the Channel Islands retail market direct, though retailers franchise and enter via concessions/shop-in-shops.

New Entrants to the Market

Jack WillsGeorgeRiver Island

KEY FEATURES OF LEASE
ITEMCOMMENT
Lease TermsTraditionally, Channel Islands leases have been for a term of 15-21 years and could be higher, with 42 yrs often seen in parts of the retail market (e.g for an anchor tenant). Leases are now more typically for 9 years. Break options were rare in the past but are now increasingly negotiable. In the absence of a clear agreement in the lease, the tenant has no legal right to break so long as the landlord fulfils his obligations. Where agreed, breaks are typically at the second rent review for office and industrial space but are not currently common for retail unless the lease term is over 15 years. The authorised use will depend on the terms of the lease which will also state the degree to which this may be varied by the tenant.
Rental PaymentRents are typically payable quarterly in advance, though monthly payment can be negotiated. Turnover/percentage rents have been seen in department stores and are common in specialist sectors such as the airport. A security deposit is not normally required for a tenant with a strong covenant or where a parent company guarantee (or less frequently a bank guarantee) is provided. For weaker covenants, a deposit may be required, by negotiation with 6 months’ rent equivalent commonplace. Premium payments are common place in the retail market at times of limited supply.
Rent ReviewIndexation is common practice and fixed uplifts are increasingly being used. The basis of rental review to open market rental value (upward only even where rents generally have decreased) usually every 3 years.
Service Charges, Repairs and Insurance A service charge is usually payable in multi-tenanted buildings and covers management fees, security, cleaning, landscaping, internal maintenance of common parts, external maintenance and insurance, servicing of elevators, water, heating, air conditioning, management fees and property taxes. It excludes internal maintenance and insurance of rented accommodation, utility charges and GST (Goods and Services Tax, currently @ 5%). The landlord is responsible for external /structural matters in multi-occupied buildings (charged back via service charge) or tenant (except in multi-let buildings). The tenant is responsible for internal matters. The landlord usually insures the main structure and external fabric but will charge this back to the tenant. Insurance for common parts is also paid by the landlord and charged back. The tenant usually pays for internal insurance directly.
Property Taxes and other costs The local government or Parish authority charge the "rates," the local property tax, which is payable on commercial property (it equates to circa 3% of rent). The Parish Rates are calculated as Foncier Quarters (payable by the owner of the property) and the Occupier Quarters (payable by the occupier of the property). The rate per quarter is set annually.
Disposal of a LeaseSub-letting is usually possible under the terms of the lease, subject to landlord’s approval. Assignment rights are not normally barred in the lease but will also be subject to consent, which should not be unreasonably withheld. Early termination is only by break clause (with or without penalty), to be negotiated at outset of lease by mutual consent upon negotiation. At lease end, the tenant is responsible for re-instating the premises to the same condition as at the start of the lease, subject to normal wear and tear. All tenant improvements must be approved by the landlord subject to the alteration covenant in the lease and the fact that approval should not be unreasonably withheld. At lease end, the tenant is responsible for re-instating the premises to the same condition as at the start of the lease, subject to normal wear and tear. All tenant improvements must be approved by the landlord subject to the alteration covenant in the lease and the fact that approval should not be unreasonably withheld.
Valuation MethodsShops are valued on a 'zoning' basis. The retail zoning principle recognises that the area at the front of the shop, adjacent to its primary window frontage (normally referred to as “Zone A”) is the most valuable in rental terms. The rate per square foot halves back through regular depths towards the rear of the ground floor, with “Zone B” valued at A/2, “Zone C” at A/4, “Zone D” at A/8 and a “Remainder” zone, typically valued at A/12. Upper and lower sales floors are similarly valued as a proportion of the “Zone A” rate, with basement and/or first floor sales accommodation typically taken at A/8, and ancillary at A/20. There will occasionally be local variations to these rates, which will also depend on the quality and functionality of the accommodation, relative to the market norm. For corner units, it is usual to add a small percentage to the value of the ground floor, the amount of which will depend on the degree of overall prominence. Zone A depth in Jersey is 30 feet and in Guernsey 20 feet
LegislationThe UK Landlord and Tenant Act, 1954, Part II (as amended) and subsequent acts do not apply in Jersey but the legal framework is similar to the UK and often UK precedent is followed in the absence of local case law. Leases must be in writing and the lease document forms the standard documentation required. A mandatory standard form of lease does not exist although a market standard is in place.