Celtic Tiger rents still creating difficulties
Run-out: Saracens' James Short (left) gets away from Cardiff Blues' Luke Hamilton at Allianz Park last weekend. PHOTOGRAPH: ANDREW MATTHEWS/PA WIRE
ONE MORE THING:BQ became the latest retailer in Ireland to raise the white flag when it sought approval from the High Court yesterday to enter examinership.
This gives the DIY chain protection from its creditors for up to 100 days while it seeks to put in place a rescue plan. It follows HMV’s collapse and Blacktie’s decision to appoint a liquidator today.
These events highlight two things: the worst is far from over for the retail sector and Celtic Tiger rents continue to create difficulties for businesses that signed leases before upward-only rent reviews were abolished by Dermot Ahern in 2009.
Over the Christmas period, all media cheerily reported that retailers were experiencing strong sales again and that consumers seemed to have gotten back some of the confidence that seeped away following the collapse of the economy in late 2008. This was just an illusion. On Monday, the CSO told us the volume of retail sales in December had fallen by 1 per cent year on year.
Even allowing for the fact that this figure included motor sales, which can be volatile, it is clear consumer confidence is nowhere near being repaired.
The high cost of rents continues to weigh on the retail sector. In a statement yesterday, BQ said it would require “substantially improved terms” from landlords if the business is to get back on its feet. Its stores in Athlone and Waterford have already been earmarked for closure while BQ warned that two others are on the brink, pending deals with landlords. Earlier this month, shoe retailer Korky’s closed on Dublin’s Grafton Street after a long battle with landlord Canada Life over its rent.
Its owner John Corcoran had fought over a long period to get the upward-only clauses in leases abolished. Before Christmas, John Cahill, chief executive of Bewley’s bemoaned the €1.5 million a year the coffee chain pays to its landlord, Johnny Ronan’s Ickendel Ltd, for its iconic Grafton Street cafe. The rent doubled in 2007 due to the frothy valuations that abounded in the bubble years. The matter is currently the subject of litigation.Of course, many landlords have their only financial problems, hence their unwillingness to drop rents.
They are also within their rights to enforce the terms of their contracts.
Having promised in opposition to outlaw upward-only rent reviews, Fine Gael and Labour rowed back on this position in government, citing constitutional issues.
In opposition, everything is possible. The reality of government is very different as we are now discovering in relation to the Anglo Irish Bank promissory notes and the issue of burning bondholders.