Tackling issues around retail rents: UKFT Rise chairman
Patrick Dudley-Williams is chairman of UKFT Rise – UKFT’s supportive community for UK fashion and textile start-ups. He is also founder and creative director of men’s lifestyle brand Reef Knots. Here, he discusses issues around retail rents in response to the coronavirus crisis
Back in March, many of us were told to shut our shops. This happened to us, at our Reef Knots store in Leadenhall Market, and you may have spotted me on the BBC News talking about the pressure this is having on businesses in the area. The pain of an entire quarter of lost revenue has been made significantly worse by our council landlord enforcing full rent and service charge during the period.
Zero revenue and continuing fixed costs make a pretty simple mathematical problem with no easy answer.
Before the closure, footfall across high streets had been drying up and despite the announcement that non-essential retail shops will be able to reopen on 15 June, we currently have no plans to open the shutters. Social distancing requirements and a lack of footfall from City workers mean that we will likely remain closed until at least the autumn. Many small fashion businesses will be in the same position at a time when physical retail was already very tough.
So, what should you do if you are experiencing the same problems?
- Do the Maths: What do you need to make this a sustainable business situation for you? Before you speak to anyone, make sure you are clear what it is you are trying to achieve and why you need it. This will make for a far more coherent argument when you speak to landlords. Everyone is going to take a hit, so work out a position that you can live with that shares the burden with all involved.
- Talk to the Landlord: Firstly, talk to your landlord immediately and explain the situation. They will already likely be talking to multiple tenants. They don’t want empty units and many landlords are giving rent holidays to tenants as they realise there will not be a queue of new occupiers if they let them fail.
- Play the Long Game: As the situation continues to be ongoing and footfall will likely remain low for an extended period. Make sure that you leave yourself open to further negotiation in the case of a second wave or slower long-term footfall. Make it clear that you need help now, but that you may need further help in the future.
- Stronger Together: Since our tenants formed a single tenant’s association, we have been speaking to our landlord with one unified voice. This allows us to hold far greater weight in any negotiation as the downside to the landlord is greater if we do not agree. We have set up a Twitter page and attracted press attention from the Evening Standard and the BBC News.
- Access Grants & Furlough Staff: Make sure you have applied for any grants that you are entitled to. These include £10,000 and £25,000 grants for retail businesses with a rateable values up to £15,000 and £51,000 respectively. The government furlough scheme is also there to help with staff costs while you are closed.
- Service Charge: Have the services you’ve paid for been stopped? Are the lights off? Are the cleaners there? We have been told to remove rubbish from our communal bins because contractor collections aren’t happening. This sort of information will help give you the tools you need to argue for a rent or service charge holiday.
It is important to state that landlords and tenants both find themselves in a tricky situation that nobody asked for. The ability of landlords to help will depend on many factors such as their size, cash position and mortgage commitments. Clear and open discussion is the key to managing your way through this process and you must be prepared for the fact that they may not want to help.
Ultimately, the structure of retail rents and contracts may need to be overhauled post the Covid-19 crisis. The pandemic has certainly pushed forward the drive to digital retail by many years, which may in turn lead to a repricing of physical retail assets. Turnover based rents and a renegotiation of current contracts are already being discussed widely within the industry as fairer long-term solutions.
I wish you and you staff all the best in these difficult situations.
What have your experiences with landlords been like? UKFT Rise subscribers: Let us know the good and the bad – email email@example.com
UKFT is in constant dialogue with the government and is outlining the latest support available for businesses on our website. We will update the details as and when the situation changes.