Shopping centre owner Intu has announced that unless it can reach a decision with its lenders it will be left with no option but to call in administrators this week.
Vicky Hernandez, a Partner in the Real Estate team at Royds Withy King and whose clients have included AllSaints, Ladbrokes, Moss Bros, The Body Shop and Arcadia Group, comments.
“Whilst no one will have been surprised by Intu’s announcement – 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.
“Current projections suggest that no more than 20% of the rent due on the June quarter day (24th June) will be paid. This is truly 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, and we are going to need a huge increase in footfall before the position improves.
“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.”