Rent flexibility urged for small retailers
Retailers warn of toughest quarter day since last recession
This could be the toughest quarterly rents payments day for at least 18 years warned the British Retail Consortium (BRC), as it urged landlords to show more flexibility on retail rents. Today (Wednesday) is the first quarter day of 2009. Hard-pressed retailers face rent bills totalling hundreds of millions of pounds*.
The first few months of the year usually see the lowest levels of consumer spending. This year has been compounded by recession and follows the worst December sales performance the BRC’s Retail Sales Monitor has recorded in the fourteen years it has been running.
Traditionally commercial landlords demand rents be paid in advance, four times a year, on the quarter days. It is an anachronism dating back hundreds of years to the days when horseback was the fastest means of communication.
The BRC’s long-running Rent Monthly campaign to encourage landlords to substitute monthly for quarterly terms has gone a long way to establishing monthly terms as the norm on new leases. Some landlords have offered the same flexibility on existing leases, often where a retailer is struggling. The BRC is now calling on all landlords to show willingness to switch existing leases to monthly terms, where that is what tenants want.
This rents regime can create major cash flow management difficulties for retailers and has no place in the modern age of instant electronic money transfers. Its significance to retailers of all sizes is demonstrated by new figures in a ‘How to’ guide produced by the BRC to help retailers ask landlords for new terms has been downloaded from the BRC website over 50,000 times since the start of 2008.
The BRC is also calling for the abolition of upward-only rent clauses, which allow landlords to increase rents each year regardless of economic conditions, and is asking the Government to put an immediate freeze on all new business rates burdens.
Stephen Robertson, BRC Director General, said:
"A dismal Christmas for many retailers and following the year’s lowest spending months has meant the toughest quarter day since the early 1990s. A thriving retail sector is essential for the health of landlords and the wider UK economy. Boarded up shops are becoming commonplace. An unrealistic payments regime can only increase the pressure on hard-pressed retailers and the jobs they support.
"Some landlords have recognised this ancient anachronism is even more unjustifiable in the toughest trading conditions for years. I urge all landlords to show the same flexibility."
By the end of this year 140,000 shops will be vacant and 200,000 retail jobs will have been lost, according to Experian.
This year’s annual increase, due on 1st April and based on last September’s RPI inflation, is due to be 5%. In sharp contrast, the latest RPI inflation was just 0.0 per cent and domestic council tax bills are typically going up this year by 0-3 per cent.
*Government proposals will push retailers’ business rates bills up to £7 billion by 2010/11. A massive £1.6 billion, 30 per cent increase on 2008 – equivalent to the average salaries of over 100,000 retail employees.