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Arcadia battles to reduce retail rents

Arcadia is looking to drive down rent during its negotiations with UK landlords as it plots further international expansion.

The Topshop owner, which has 600 leases coming up for renewal in the UK over the next three years, is seeking to reduce rent, have rent-free options and break clauses added, and in some cases is requesting landlords stump up for shop refits as part of new lease deals.

Furthermore, Arcadia is seeking to negotiate 5% turnover rents, where the rent paid on a unit is a percentage of the store’s annual turnover. The industry average is around 8%.

One property agent said: “Outside of the M25, every retailer has the ability to [request turnover rent]. The problem is Arcadia has 600 leases whereas others only have 50.”

Another added: “Landlords will often buckle because Arcadia usually owns one of the key anchor stores in a complex”.

A third agent told Drapers the retail group was “asking for the earth”. He added: “A lot of these schemes can’t exist without Arcadia. Hartlepool, Mansfield – Arcadia is the lifeblood of these kinds of town.”

Sir Philip Green has made no secret of his plans to reduce its store portfolio, exiting 60 locations during its most recent financial reporting period of 12 months to August 25, 2012.

A spokeswoman for Arcadia confirmed it was looking at turnover rents as one option when discussing rent negotiations, but declined to go into further detail. She also would not comment on store refits.

Meanwhile, the fashion multiple is expanding its footprint internationally following last year’s investment from private equity firm Leonard Green & Partners. Speaking at Arcadia’s first Franchise Forum last week, to which Arcadia invited 60 existing and potential international partners, Green and international director Paul Gould laid out the company’s overseas plans.

Asia is top of the agenda for Burton, which trades as Burton Menswear London internationally, as is makes its first moves into Malaysia, Thailand and Indonesia this autumn.

Dorothy Perkins and Wallis are to expand in the same territories, with plans for a further 19 stores to be opened in Thailand over the next six months.

Arcadia is plotting growth in Canada with its concessions partner Hudson’s Bay Company, as well as five further Topman/Topshop stores over the next three months. It is also looking to introduce Miss Selfridgeinto Canada.

Three more Miss Selfridge stores are planned for Australasia this autumn, along with five more for Topshop/Topman in the next year.

Autumn 14 will also see the launch of the first New Zealand Topshop/ Topman store. The business is also talking to partners in Mexico, Uruguay, Columbia, Venezuela, Panama and Peru. Arcadia has more than 550 international stores.

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