Thursday, 19 February 2009

Better deals for all tenants or just the luxury sector?

Landlords are starting to realise that if they want to achieve lettings and fill their high street or high end retail premises, they have to be more flexible on rents. While some of the big retailers are either closing stores or not in a position to expand, the smaller value retailers are being made offers and getting approached to take space they would not normally be considered for. Fashionista's view is that there are some bargains to be had.

In this credit crunch era landlords are becoming troubled tenants' largest creditors and can wield significant influence in particular at creditor meetings. As reported in Drapers, at the recent creditors meeting to save Stylo (the owner of Barretts and Priceless) the vote to accept the company voluntary arrangement is said to have been defeated by the group's landlords who voted against reduced turnover rents.

So, where does this leave the more up-market fashion retailers? Are they in a better position to negotiate favourable terms on new leases, especially where the available premises are considered 'high end'? Up market retailers may secure lower rents per square foot more easily than their more down-market contemporaries because of their strong brand values and clarity as to their target customer. They stand out in shaky economic times. Wouldn't a landlord of a higher end property want a better looking, more resilient, on-trend fashion tenant?

It appears so - the market is awash with the news that many luxury brands are seeking and securing prime retail space in London – Fred Perry has recently taken an assignment of a lease of space in James Street WC2 which has 6 years to run while Jack Wills, the self styled university outfitter, is taking over Diesel's Kings Road premises and a lease with 11-years to run. The bargaining position of landlords is not to be totally written off, as recent situations have attested. Jack Wills, for example, is paying a premium for its recently acquired Kings Road premises.