Boots, Carphone Warehouse, Dixons, Top Shop, Debenhams, HMV and Argos are renewing calls for flexibility on existing leases, so that cash-strapped retailers can pay rent one month in advance rather than with a three-month payment.
The call comes two years after an initial campaign to change the leases. This has seen some new leases move to a one-month arrangement, but many older, three-month arrangements have years left to run.
British Retail Consortium director general, Stephen Robertson, said: “Requiring rents three months in advance is at odds with standard business practice. It’s a historic and costly practice, rooted in the days when communications were governed by the speed of a horse.
“So far this year, a number of retailers have gone into
administration. Seeing retailers driven to the wall is in no one’s interest.”
Most pension funds will own part shares in retail outlets, but some, such as the Universities Superannuation Scheme, own whole shopping centres.
While in some cases landlords might listen to clients that are
in financial dire straits, Greg Wright, principal and property investment expert at Mercer, thought it unlikely that old leases could be changed, as pension funds were also suffering as a result of declining property values.
He said the most likely outcome from this pressure was a compromise, whereby pension funds secured longer leases that offered inflation-linked rent in return for giving month-in-advance deals.
“We know fund managers have spoken to retailers about moving away from this sort of structure to something that provides
year-on-year price inflation to the income and passes straight through to the clients.
Obviously, that is exactly the sort of cash flow pension funds want – a bond-like structure of income.”
