Posted by Vicky Hernandez, Partner
Situation critical: Intu’s woes tell us that retail landlords desperately need Government support
Following the news that Intu is close to administration, Vicky Hernandez from our specialist Retail team looks at what this might mean for commercial landlords in the sector as well as the future of the high street.
Whilst no-one will have been surprised by Intu’s announcement that it will have to appoint administrators later this week if it can’t agree a deal with its funders (in fact there is something of the inevitable about the whole situation) it is still a stark illustration of the crisis facing the retail sector at the moment. Much has been written about the situation from a retailer perspective (and the daily list of new brands that have launched a CVA or appointed administrators has started to lose its shock value) but we have heard less about the situation from a landlord’s point of view.
Current projections suggest that no more than 20% of the rent due on the June quarter day (today) will be paid. This is a frightening statistic. With an extension to the moratorium on lease forfeiture until September (and likely beyond) tenants now have a degree of comfort in knowing that they are protected. Their long-term survival is by no means guaranteed though, and we are going to need a huge increase in footfall before the position improves, but the Government is at least supportive.
Landlords, however, still appear to have been overlooked. The voluntary code is all very well but unless those retailers who are in a stronger position choose to co-operate and pay rents there is an argument that they will be able to take advantage of the situation.
If the Government does not step in to support retail landlords, and if rents are not paid, they will be left in an impossible situation. They have limited options in terms of recovering unpaid rents (and will be all too aware that even if they do pursue their tenants this is likely to result in further retailer insolvency and empty units) but still have their own costs to meet and debts to pay.
Large shopping centre owners like Intu may have attracted the most publicity but the retail crisis impacts landlords across the spectrum; from those who own just one commercial unit to those who own portfolios of shopping centres worldwide. When they fail there will no doubt be potential buyers out there looking for an opportunity to buy real estate at discount prices and in many cases that real estate will then be turned from retail space to residential and other uses before being quickly sold on.
And what of the future of our high streets and town centres? We are at a critical point now when Government focus and support is desperately needed to ensure the survival of these areas and to preserve public retail and leisure space for the future. Intu is but the tip of the iceberg: retailers and landlords really need to examine their own positions and work to support one another – without one the other cannot exist and the future looks like a much bleaker place.
If you have any questions for Vicky or any of our specialist retail lawyers, please contact us today.
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