Retailers are seizing the opportunity to take “decisive action” on their property portfolios in 2020, say experts, as restructurings and company voluntary arrangements continue to put downward pressure on rents.
The British Retail Consortium described 2019 as “the worst year on record” for retail”.
The Centre for Retail Research reported 16,073 store closures during 2019, of which 5,901 were closed by large retailers with 10 or more stores – up 79% on the 3,303 they closed in 2018.
Jigsaw became the latest retailer to demand rent cuts this year, asking for discounts of up to 30%.
A Jigsaw spokeswoman said: “Like any good retailer at the moment, we are using current market turbulence as a reminder to seek best value from our landlords.”
Experts predict 2020 will be “more of the same”. Since the new year, Joy has been on the brink of a third collapse, and department store Beales is reportedly in talks with buyers to avoid administration (see opposite). As a result, more retailers are asking for rent reductions to match their restructuring competitors.
“There is no fence-sitting – people are not hanging around,” said one property expert. “We’ve found [retailers] quite decisive in the last week, whether it be renewing leases, leaving stores or taking new space. They are making decisions.”
One agent predicted: “From a property perspective it feels like there is quite a lot of purpose around. Retailers have woken up and worked out what they want to do. There will be more deals this year as the gap between what landlords and retailers expect will become much smaller.”
One expert said: “CVAs delivered a steady stream of stock into the market, and that will depress new rents. ”
One agent added: “We see prime shops available at a tertiary rents or, otherwise, no rents quoted at all. Rents have come down to a certain level and there is the flexibility that is accepted in the market by landlords. Hungry retailers will take advantage.”
“The question we’re getting from many successful retail clients is: why should they be penalised?” said Jonathan De Mello, head of retail consultancy at property agency Harper Dennis Hobbs.
“Many are looking to go back to landlords for a reduction in store portfolios and rents, and some of them are talking about CVA clauses with similar levels of discount.”
De Mello pointed to the knock-on effect retail administrations and restructurings are having in the retail property market.
Losses at property owner British Land rocketed by 740% to £404m for the six months 30 September, and shopping centre owner Intu called in advisers in November to work on balance sheet restructuring.
De Mello added that “one of the bigger players in the property market will close down or subdivide themselves” in 2020, which will have implications for its portfolio.