[2023] UKUT 153 (LC)

Mrs Okell summarised details of alternative properties considered within the Intu Centre, together with some footfall data provided to the claimant by the Pragma consultancy, in a table appended to her report and the salient detail is reproduced below:

No. 19 (former Café L’Antico) is a ground floor unit located on Queens Road and although it forms part of the Intu Watford centre it is outside the enclosed part of the scheme. Mrs Okell noted that this property had about 60% lower footfall than the reference property due to an inferior position in what she described as a ‘service business’ location. The unit was also larger than the reference property but had a narrower frontage with less display space. At the time the research was being conducted the unit was still occupied by another party although the landlord had indicated that possession could be obtained.

The former Carrera Shoes at No.142a was on the upper floor of the centre and had footfall which was some 95% of that at the reference property when measured at the Meeting Alley frontage. Mrs Okell noted Pragma’s comments that footfall was ‘fairly low during the week but high at the weekend’. She considered the unit to be less prominent due to poor lighting, low ceiling and presence of two structural pillars which obscured the frontage. It was a smaller unit than the reference property with a narrow frontage and less display space. The occupational costs were approximately 30% higher. Again, this unit was occupied but Intu had advised that they could potentially secure possession.

Mrs Okell said that No.31a had been suggested as a relocation possibility by the claimant in a letter to Intu dated 28 July 2015, but Intu responded stating that the unit was already under offer at a rent higher than their estimated rental value.

Similarly, the former Rush Hair unit (No.27) was put forward by the claimant on 13 August 2014. Mrs Okell noted that the proposal was on the basis of reducing the size of the unit to keep the rent low, but Intu responded to say that reducing rent was not an option. Although the unit was again raised by the claimant in July 2015, nothing further was achieved as Intu had the unit under offer at a rent higher than their estimate of rental value.

No.49 was suggested by the claimant in a letter of 28 July 2015 and an offer made. The claimant indicated that they wished to reduce the unit in size to 800 sq. ft, a similar reduction in floorspace having been achieved to the adjacent unit which was occupied by Thomas Sabo. Intu replied two days later stating that the unit was under offer at rent higher than their estimate of rental value.

We note that Mr Lightowler had appended projections of turnover and profitability for units 142a, 31a and 19 to his witness statement. He anticipated sales 35%, 25% and 50% lower at the three locations respectively and estimated that profitability would be reduced by 89%, 82.5% and 98.3% when compared to the average of the three previous years.

Mr Henderson acknowledged in his report that the claimant shortlist included unit 31A, unit 27, unit 142A and unit 49. He explained that the former Café L’Antico at 19 Queens Road had also been offered by Intu, as had unit 109 and unit 162, but the latter two were considered unsuitable by the claimant. In his report Mr Henderson did not provide his views on the suitability of any of these units but did note that Intu had “given its blessing” to the claimant to instruct Pragma to advise on options for relocation. In cross examination he conceded that the available alternatives in Intu Watford were not suitable for the claimant.

Pragma undertook a footfall study at Charter Place and outside Nos 19 and 142a between 10 and 13 September 2015 and additionally analysed footfall data supplied by Intu. Mr Henderson said that Pragma had initially stated that their report would include a range of flow computations and profit and loss estimates to be based on data supplied by the claimant. In the event the data was not forthcoming and the report therefore focussed on footfall and a review of the competition. The report concluded that footfall in the mall directly outside the reference property was 48,000 per week and that the subsidiary frontage in Meeting Alley the weekly figure was 43,000. The corresponding figures for unit 19 and unit 142A were 19,000 and 41,000 respectively. Mr Henderson explained that Intu monitored footfall levels in the centre using a camera system. This showed that at the time that Pragma undertook their research footfall outside the lower mall entrance to Marks & Spencer, very close to the relocation property was 68,000, some 41.6% higher than at the reference property.

Mr Henderson noted that Pragma concluded that neither of these two relocation options were suitable since they were less prominent and had lower footfall. Mr Henderson observed that Pragma thought that the claimant should concentrate on the potential to relocate to the ground floor of Intu Watford as it had the highest footfall. They commented that there was an additional potential for the claimant to locate on the High Street where a higher proportion of their target customers were likely to be encountered, footfall was expected to be stronger and competition weaker.

Mr Henderson said he was surprised that the relocation property was not included in the report. E-mail correspondence between the agents for the claimant and Intu was appended to Mrs Okell’s report and this clearly showed that discussion about the relocation property commenced in August 2015 and that the Pragma Report was delivered in draft on 18 November 2015. Mrs Okell noted that Intu’s rental expectations for the relocation property were not communicated until after Pragma had started work. The relocation and reference properties were close to one another in any case.

Mrs Okell thought that the difference in footfall could be explained by the significant number of vacant units and lack of proactive management in Charter Place. Mrs Okell said that Charter Place was arguably “in the shadow of the scheme” and it was reasonable to assume that Charter Place footfall had been adversely affected as a result. She concluded that footfall would have been higher prior to the scheme and the difference between the two locations would not have been significant. No other evidence was adduced to support this opinion. We have already described the retail facilities in Watford and although Intu Watford is regarded as the primary retail location in the town it is by no means the only location a retailer looking for space would consider. Mr Henderson said he had not been provided with any evidence as to whether there were any suitable location options outside Intu Watford. Mrs Okell addressed this point in her supplemental report and confirmed that although consideration had been given to units outside Intu Watford, no suitable units had been found.

She did not reveal which units had been considered and it was not clear whether she knew the locations. Nevertheless, she had conducted an exercise using “CoStar” which she described as ‘industry recognised software’, to research retail lettings which had taken place between 1 January 2015 and 1 January 2017.

The search turned up 15 properties, four of which related to shops in Intu Watford which Mrs Okell excluded as the claimant was actively considering units in the Centre. Only five of the remainder related to shop units in the town centre. Two of these were located in the Parade, an area of the town described by Mrs Okell as tertiary. Two further properties were in Market Street which runs perpendicular to the High Street and contained a mixture of local independent traders and service-style businesses. Mrs Okell thought that Market Street could not be compared with Charter Place as a retail location. The final property was in Beechen Grove and thus was outside the recognised retail core. It was situated beneath a block of flats and lacked retail adjacencies. Mrs Okell recognised that the search was not evidence of the claimant’s search for units outside Intu Watford, but she considered that it provided a good indication of what was available at the time the claimant was seeking a relocation property. She went on to conclude that there were no suitable alternative premises for the claimant to relocate to. We have some concerns about the efficacy of this exercise, as the database will only be as good as the data inputted. Mrs. Okell admitted as much at the hearing and also acknowledged that there might be properties that were available ‘off market’. However, if that were the case, we would have expected Mr. Appleby to be aware of them and to have brought them to the attention of Mr Lightowler.

By the end of November 2022, when Mrs Okell and Mr Henderson were compiling their preliminary statement of agreed facts and issues, they had determined that a further five properties had been available for consideration by the claimant. Details appended to the statement showed that CoStar had once again been used as the means of searching.

The first of these was 52 High Street Watford which was located on the western side of the High Street close to the junction with Clarendon Road. Arranged over basement and ground floor it extended to 2,315 sq.ft, some three times the size of the reference property. After being on the market for three months it let on a term of a year at £105,000 per annum. The rate liability was £47,081 per annum. This property was in a part of the High Street that was affected by the redevelopment of both Charter Place and an immediately adjoining building.

The second option was 68 High Street, a ground and first floor retail unit forming part of a block built in 1931. The block is arranged over four floors and has distinctive black timber and cream plaster elevations. There was some conjecture at the hearing over the planning status of the building and specifically whether it was listed although nothing was provided in evidence to enlighten us. The property offered 1,680 sq.ft of floor space and was let on a three-year term from October 2015 at £50,000 per annum. According to the CoStar details no rent free period was granted. In common with 52 High Street this property was situated directly opposite Charter Place and would, to some extent, have been affected by the redevelopment and the associated street works.

The third option was 122 High Street, a modern unit at the southern end of the street and near to the junction with King Street. The CoStar details described it as having a floor area of 1,700 sq.ft on the ground floor only but when we inspected we found that Waterstones, who were ultimately the occupier, were trading on two floors. It was unclear whether the lease covered both floors but that would seem to be a reasonable assumption in the circumstances. We found the letting details difficult to reconcile. Despite being on the market for 11 months it eventually let on a 10 year term at a headline rent of £110,000 per annum against an asking rent of £75,000 per annum. Nine months rent free was conceded which was said to have reduced the net effective rent to £99,351 per annum.

The fourth shop was 140 a High Street which was at the southern extremity of the High Street and therefore in a secondary position. In our view it was not a suitable option for relocation and can be excluded from consideration.

The final possibility was confusingly listed as 1 Clarendon Road but in reality, was round the corner at 5 Parade. This property was a conventional shop unit on two floors although the sales area only extended as far as the ground floor. According to the CoStar particulars the floor area amounted to 2,739 sq.ft. and the property was let to Greggs for a 10 year term from August 2015. The rent achieved was £55,000 per annum with a six month rent free period. The asking rent had been £57,500 per annum. The property is adjacent to Pret a Manger, Shoe Zone and Ladbrokes. Starbucks are situated on the opposite side of Parade which itself is pedestrianised.