These are truly extraordinary times. The speed and severity of the social and economic upheaval caused by COVID-19 is an unprecedented set of events in most people’s lifetimes. Retailers have been some of the hardest hit and much of the Government’s swiftest response was to help them. But there are knock on effects that present a real challenge to ensuring public health and safety as this crisis continues.
This article in Drapers is written by the president of Revo, a retail based business community that, in a former guise, was known as the British Council for Shopping Centres. It raises the never popular narrative that retail landlords might need help in this crisis quite as much as retailers. This is a quiet voice, but one that I think must inevitably get louder. Over recent years the spate of administrations and Company Voluntary Agreements (or CVAs), a type of insolvency procedure, has massively reduced rents in the retail arena and left many towns with record vacancy rates as retailers have sought to remove underperforming stores. This increases costs for landlords, especially those that own shopping centres where, as well as losing rental income and paying the business rates on empty units, landlords also pay the service charges and insurance on those empty units.
Wednesday, the 25th of March, was the day that many retailers were due to pay rent and service charge to their landlords. Most didn’t. Who cares? These wealthy land barons can afford it, surely? The truth is rather starker than that for shopping centre owners in particular. Since rents have fallen, many landlords have struggled to service their loans and mortgages, let alone the myriad professional services that are required to run a shopping centre. This latest problem of retailers withholding rent, knowing that the Government has said they cannot be evicted, has piled on even more pressure. And these landlords are perceived seldom faceless tycoons when in reality they are our pension funds holding our retirement savings, and they are our local authorities fighting to keep our local places afloat.
Shopping centre landlords do not get Government grants. They do not get financial support to furlough staff. They do not even get the 12 month business rates holiday on empty units. But they do have to keep these shopping centres open so that we can still buy food and medicine, even if 90% of the other shops are shut.
The costs of keeping a shopping centre open (cleaning, security, lighting, etc) are paid for through a service charge that is contributed to by every unit in the centre, including empty ones where the landlord covers the costs. If shops that are shut refuse to pay the service charge and the rent, there is no available money to keep the shopping centres open.
This is a looming crisis that could mean landlords have no choice but to shut their centres, which would be devastating for communities up and down the country, deprived of food and medicine.
The pain needs to be shared if we are to get through this so I ask shopping centre occupiers, please, engage with your landlords, repair the relationships, and help support the communities you rely on by sharing a little bit of the Government aid with landlords to help them ensure that supermarkets, pharmacies and other critical services can remain trading.
It is overlooked that property owners have their own obligations to investors and lenders, and a sudden cut to their rental income has the same ultimate result: the immediate closure of shops and services, and the long-term decay of high streets and town centres