Against a backdrop of ongoing retailer insolvencies, with Karen Millen, Jack Wills and Clintons the latest victims, the future of the high street as we know it looks increasingly uncertain.
From a landlord’s perspective, the outlook is somewhat challenging. There has been a definite power shift from landlord to tenant, with some retailers identifying the increase in shop closures as a bargaining chip.
Last year saw a rise in Company Voluntary Arrangements (CVAs), which allow retailers that are in trouble financially to pay lower rents as part of a rescue package. This in turn led to more resilient chains such as H&M demanding the same reduction in rent.
While recent research from Deloitte shows that CVAs are declining as landlords push back, retailers are now taking a new approach. In particular, stalwart of the high street WH Smith, is now asking its landlords to receive rent payments in arrears to help with cashflow.
Although so far WH Smiths has weathered the current storm on the high street fairly well, it clearly senses an opportunity to push for more from its landlords. The retailer recently negotiated rent cuts of around a third on leases renewed last year, and also already pays rent in arrears on some of its stores. It now wishes to extend that trend.
This latest twist in the tale of the high street shows just how much traditional leasing models are being revolutionised, partly due to the genuinely challenging conditions many retailers face, and partly due to the fact that well performing retailers increasingly recognise that they now have a stronger negotiating position.
There has also been much talk of taking a more ‘collaborative’ approach to landlord and tenant relationships, such as the ‘total occupational deals’ put forward by H&M last year.
WH Smith’s landlords have yet to respond to this latest request. It is unlikely that they will be overly enamoured with the prospect, but in the current climate it may also be that they do not have much of a choice.
What is clear, is that both retailers and landlords alike need to collaborate more and adapt to ensure our high streets survive with a focus on increased diversification and residential use in order to rejuvenate the high street to make it more of a retail experience and destination.