H&M group is asking landlords to accept turnover-based rents as part of any tenancy agreement for lease renewals and new stores, Drapers understands.
The retailer is understood to be offering landlords between 15% and 20% of turnover at stores, in exchange for a “rolled-up” all-inclusive lease that would cover rent, service charge and business rates. The negotiations are understood to be for new stores as well as those for which leases will expire within the coming year.
One property agent told Drapers: “[H&M] has more buying power than other retailers and there are discussions over turnover rent deals. Landlords have to work out whether this will work for them or not. If they take off service charges, business rates and rent what does that leave them afterwards?”
Another industry expert said: “H&M is seeking the harshest terms of any occupier in the market – as a result of which some landlords told them to walk. They are seeking turnover deals that cover rent, rates and service charges.”
One agent told Drapers the negotiations are a consequence of the plethora of retail CVAs across the UK high street: “The conversations we’re having are brutal – this is a consequence of the CVAs. H&M is following Next and asking, ‘Why are we the mugs paying the full rent?’”
One property adviser said other retailers are also considering their options with regards to property and leases: “There’s probably an unprecedented number of retailers who are talking to the big accountants about their options.
“You’d be prudent to be looking [at lease terms] in such a difficult market. Retailers need to look at availability and what their options are. Ultimately, the retail property market is driven by supply and demand. [Landlords] may have to accept a turnover or rates-only deal.”
H&M group, whose brands include H&M, Cos, & Other Stories and Weekday, grew net sales by 11% year on year to SEK57.4bn (£4.8bn) in the two months to 31 May.
H&M declined to comment.