Tenants turn up the heat
Published: 07 February, 2009
The British Retail Consortium says property matters will become life-or-death issues for retailers as the recession bites, writes Graham Parker
The British Retail Consortium is turning the screw on the property industry. Hard-pressed retailers are looking to their landlords to help them through the recession and, scenting victory over the issue of monthly rent payments, they are now turning their fire on service charges and are threatening to reopen the issue of upwards-only rent reviews.
Yet at the same time they are looking to their landlords to make common cause with them on empty rates and the planned rating revaluation. In a wide-ranging speech to the BCSC, BRC director general Stephen Robertson explained why owners and occupiers need to work together if either are to survive.
Robertson stressed that, bad as the economic news has been over the past year, the full impact of the downturn has yet to be felt. Doing little to refute his media tag of ‘Mr Doom & Gloom’ he warned: “The man in the street still thinks he’s OK. But it could be that he comes to look back on this period as a golden age.” The BRC’s own economists are taking an even more bearish stance than the consensus, forecasting a 3 per cent contraction in the UK economy during 2009.
Already retailers have seen their worst December for 14 years, down even on 2007’s disappointing levels. “Only food performed,” said Robertson. And he said the impact of the collapse of Sterling will only make its impact felt on buyers’ costs in the second half of this year. “That should introduce a bit more excitement and colour into negotiations with landlords,” he forecast.
“Retailers will need to keep their two biggest outgoings – property and people – to a minimum,” he said. “Three-quarters of the retail boards we surveyed said they are looking to make more efficient use of their existing space.”
And with this in mind, the BRC is gearing up for a major campaign on the unglamorous but nonetheless thorny issue of business rates. “The projected increase will add £1.6bn to retailers’ rates bills in two years’ time,” Robertson said. “That’s a 30 per cent increase.”
He called on the property industry to help fight the imposition of rates on empty properties, and also called for a joint campaign for a root and branch reform of the rating system which is threatening to hit retailers with a four-pronged attack. In addition to empty rates, retailers are about to be hit with an annual inflation-linked increase. And a full revaluation is due in 2010. Lastly, the government want to allow local authorities to levy a supplemental rate to finance infrastructure projects. “It needs proper safeguards, including a compulsory ballot of businesses,” said Robertson.
Another significant property-related cost for retailers is the service charge, and here Robertson warned landlords that budgets are going to come under increasing scrutiny. “We must tackle rising maintenance costs,” he said. “We need to keep a careful eye on affordability and value for money.”
He praised the pilot scheme at a number of regional malls including White Rose in Leeds, Cribbs Causeway in Bristol, Merry Hill in Dudley and Meadowhall in Sheffield which is on track to deliver a 20 per cent reduction in service charge budgets.
And he took advantage of a captive audience of property figures to hammer home the point that has already been made by the likes of Sir Philip Green that changing from quarterly to monthly rent payments can have real cashflow benefits for retailers. “There has been movement on new leases,” he said, “but change across the board is inevitable so why don’t we just get on with it?”
And he finished by going back to the issue of upwards-only rent reviews. In the early years of this decade retailers and landlords fought each other to a standstill over this issue and, although the government refused to step in and enforce change, it reserved the right to legislate on the isssue in the future.
“The government only said it wouldn’t intervene for the time being,” he said. “And if the market was found not to be operating properly then it would seek other solutions. Well, we now have many retailers occupying over-rented property. That’s iniquitous and it’s not good business sense.”
Leaving the threat hanging in the air, he ended on a conciliatory note. “We should never forget that retailers need the property industry as much as you need
