Mixed messages on the fate of retailing

One in 10 retailers closed their doors between January and September this year according to research released today by the Local Data Company.

Fashion and footwear was one of the worst casualties of the recession with 17.9% of stores in the womenswear and kidswear sectors and 12.4% of menswear stores shutting their doors in the first nine months of this year. Footwear also fared badly with 14.9% of stores closing.

The Times suggest that the independent sector was a casualty of rising rates and limited access to credit during the period, with 15% of independent fashion stores reported to have closed in the nine months.

However on the same day retail landlord Land Securities stated that they will no longer offer retail tenants rent concessions amid signs of increasing demand for space.

Land Securities chief executive Francis Salway told The Times: “The downturn has been tough on property companies and on retailers. There are instances of retailers still asking for concessions, and it can be in our interests to show flexibility in specific areas, and we have led on a number of such initiatives. However, we do not believe across-the-board changes to agreed contracts are appropriate.”

Land Securities is the largest property developer in Britain, and has 1,600 retail tenants.

The revelation came as Land Securities revealed it was offering a new lease that does not penalise tenants for paying monthly instead of quarterly, according to The Times.  It intends to roll it out to its entire portfolio.

The new agreement called the Clearlet lease, will see the landlord scrapping the 1% premium on monthly payments.

Land Securities comments were supported by the British Property Federation. Its chief executive Liz Peace said: “We’ve seen first hand the steps landlords are willing to take to help retailers, from offering monthly rents to working with them to reduce service charges. But the fact everyone needs to understand is that cutting rents too far would undermine the investment value of retail property.”

Rival landlords British Land and Hammerson have also noted an increase in demand for properties from retailers.

So what’s going on?

Well, it appears to be that the strong are getting stronger at the expense of the independent retailers. Relatively good figures coming from the likes of John Lewis, Debenhams, Arcadia Group, River Island and Next show that there is money to be made in the High Street but only if you have the financial muscle. No doubt these large groups have been able to negotiate hard with their suppliers over terms, have areas where costs can be trimmed and have the supply chain management to cope with the tough trading conditions.

However, the independents are fighting to get funding from banks, loss of credit insurance cover leading to curtailment of supplies or pre-paying and very little excess ‘fat’ to trim.

I think that we may see next year’s VAT change and the large business rate increases being the final straw for many independents.

I hope not.

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery

Leave a Reply

You must be logged in to post a comment.