Landlords are requesting talks with retailers over their demands to pay rent on a monthly basis to ease cash flow as the credit crunch worsens.
Landlords said they were keen to find a solution to retailers’ growing dissatisfaction with paying their rents as a large lump sum on a quarterly basis, which makes maintaining cash flow difficult.
Land Securities commercial director Ronan Faherty said: “I can understand the cash flow argument from retailers, but we are as profit and loss-driven as anyone and we face the same challenges. But it’s important to create a win-win situation and we want to hear what retailers want. Do they want this as a short-term situation, or longer?”
Sir Philip Green, owner of Arcadia Group, is understood to be rallying high street retailers to increase pressure on landlords to change the long-running system where tenants pay three months rent upfront.
Some landlords told Drapers that they were already signing new monthly leases. However, some retailers also want existing lease agreements to be changed.
One young fashion boss said: “As we move through the recession, it’s in the interests of retailers and landlords to protect good business. We are securing monthly rents on new deals, so why would that not be relevant for deals that have already been done?”
However, another landlord said: “We signed more than a 100 leases last year and the issue of quarterly rent payments hardly came up. It’s not feasible to change existing leases once they have been agreed.”
One retail agent added: “If all the retailers worked together to demand monthly payments then landlords would have to accept it, but retailers don’t have a history of working together on these things.”