Thursday, 8 January 2009

Economic Hope?

In the current economic climate, landlords and shopkeepers are adapting to harsh realities. House of Fraser has recently negotiated with landlords throughout the UK to pay rent on a monthly basis. It is believed that it has successfully done so on 15 of its 63 stores including Lakeside and Medowhall shopping centre. There have been calls from the likes of Philip Green to push landlords to agree to monthly rental payments to assist the cashflow of high street traders.

Regardless of the economic position, a precedent may be set for the future for retailers to pay on this basis even in a growing market. The length of commercial leases has been considerably shortened over the last decade, there are fewer 25 year leases, with shorter leases of 5 to 10 years now being favoured.

In this period of low activity, with landlords desperate to fill space, tenants are gaining the benefit of further incentives, such as longer rent free periods from 6 months to between 8 and 12 months. Further, as there appears to be a relocation of head offices into the wider West End area with Marks & Spencer moving to Baker Street and Burberry to Victoria, the prediction is that there will be a re-adjustment of rental expectations by landlords.There was promise in the fashion market earlier this year with 15 new Burberry stores opening and 33 Laura Ashley stores planned. There will be opportunities for those with expansion plans to grow in this market, with stores such as Whittard with 127 vacant units and the Officers Club's 160 stores and various other retailers in decline; JJB Sports, Jessops, Zavvi, Adams and Land of Leather and more recently Marks & Spencer, which has announced that two main chain stores are to close and Viyella, with 107 shops and concessions including a flagship store on Regent Street. Experian, the financial consultancy, has predicted that at least one shop in ten would lie empty in 2009.