Debenhams could use the threat of store closures as a “sword of Damocles” over landlords during future rent negotiations, retail property experts have said.
The department store chain intends to cut up to 50 stores as part of a plan to reduce its property portfolio over the next five years. However, it has declined to reveal which locations are expected to be axed.
One property agent cast doubt over whether it had a definitive list of stores earmarked for closure: “There is no formal CVA [company voluntary arrangement], so there is no list for landlords to see. We understand Debenhams may wish to approach certain landlords for rent reductions, [and because the threat of closure is there] it may prompt landlords to be more accommodating.
“They may not have a list of 50, and they are reviewing which ones to keep and using that as a gentle renegotiation plan: if you don’t want to be one of the 50, then think about reducing the terms.”
Stephen Springham, head of retail research at Knight Frank, agreed: “Tellingly, a list of affected stores has not been made public. My suspicion is that although Debenhams’ senior management has a handle on its desired direction and fate of every store in the portfolio, the magic figure of 50 is actually a fairly notional one and a definitive disposal list may not even exist.”
The sheer scale of Debenhams’ estate may work in the department store’s favour when it comes to reducing its rental bill, one retail agent said.
“Landlords will be proactive in dealing with Debenhams. You will make a deal with Debenhams at a loss as you don’t want to lose the biggest taker of space. You may find landlords agreeing to take back space and scale down stores. They will be amenable.”