Retailers creaking under lockdown rents as industry warns ‘Nama-like’ problem ahead

Up to two-thirds of retailers are still carrying rent arrears arising from the lockdown of April and May, industry research suggests, as the Government prepares to publish a new code of practice for the sector in coming weeks after coming under pressure from retail representatives.

A survey by industry group Retail Excellence of its members found 67 per cent still had not agreed deals with landlords for discounts for the period of forced closure, while just a third had managed to negotiate a turnover-based rent. A quarter were contemplating shop closures due to rent pressures, while close to half of those surveyed were planning to let more staff go.

The lobby group has written to Minister of State for Business Damien English, warning of a raft of shop closures after Christmas if the situation around rents "remains unchecked". Retail Excellence told the Minister that some landlords, including on Grafton Street in Dublin, were even seeking rent hikes.

Retail Excellence said it expected the Government to publish a code of practice on dealings between landlords and retail tenants “by the end of the month”, based on a similar code in the UK. Government sources confirmed the code would be published “in coming weeks”.

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Disputes between landlords and retail tenants have begun to spill over into the courts. Jervis Shopping Centre in Dublin city centre has filed legal action as part of lockdown rental disputes with fashion retailers New Look and Topshop, Schuh, and the jeweller Fields. Meanwhile, the Omni shopping centre in Santry is suing Boots, Nando's and Tesco.

Arbitration reform

Duncan Graham, chief executive of Retail Excellence, said the code would “help” but the lobby group is also pushing for reform of the arbitration system for mid-lease rent reviews, which the sector has long argued is biased in favour of landlords. Many arbitrators are property surveyors who are tied to major property agencies that earn much of their fees from landlords.

“The arbitration system is heavily aligned to the property industry. We want something more independent that takes account of this extremely unprecedented situation,” he said.

He said some landlords were still “hiding behind” their leases and would not do deals with retail tenants: “But we are also hearing that some landlords have started to come to the table to negotiate discounts, often of up to 50 per cent.”

Colm Sorensen, managing director of the 22-strong chain of Butler's Chocolates cafes, said the property industry was trying to "divide and conquer" the retail sector, which is splintering into two groups – those who can find cashflow to pay rents demanded, and those who can't and get evicted or get "special deals".

He warned of a “Nama-like problem coming down the road” for retail landlords, as spending in shops has plummeted in the pandemic while streets have seen a collapse in footfall. Mr Sorensen also warned that “landlords will get the benefit of” Government wage subsidies and rate cuts for the retail sector, because “they always have their lease” to fall back on.

He called on the entire profession of surveyors to “stand up and be counted” and give retailers large cuts in rent review hearings, because their revenues are down “50-60 per cent”.

“Arbitration needs to be transparent and fair,” said Mr Sorensen.