Monday 20 May 2019

Increases in rents threaten retailers' future, claims REI

Retail Excellence Ireland claims upward-only rents are squeezing shop owners, writes Samantha McCaughren

Debenhams on Dublin’s Henry Street — it exited examinership after securing reductions on its rent
Debenhams on Dublin’s Henry Street — it exited examinership after securing reductions on its rent
Samantha McCaughren

Samantha McCaughren

A raft of new examinerships are likely among retailers due to renewed implementation of upward-only rent reviews, according to lobby group Retail Excellence Ireland (REI).

The body claims that new international landlords, as well as improved consumer sentiment, have resulted in new rounds of rent hikes.

However, retailers claim that the environment for retailers remains very challenging due to changing consumers trends, particularly a shift to online shopping.

"Enforcement of upward-only rent review clauses has become an acute issue for some members in recent times with the sale of many prominent shopping centres to vulture funds who, unlike more local landlords, are unwilling to engage and agree rent reductions," said David Fitzsimons of REI.

He claimed that new landlords were "digging their heels in" and were enforcing upward-only rent-review clauses "with a view to flipping the property on and turning a quick profit".

"Retailers continue to be crippled with legacy leases which were signed up to during the Celtic Tiger era, a time of limited retail availability and high rents when upward-only rent reviews were the norm," he added.

While rents fell and occupancy levels dropped during the recession, retailers with upward-only rents were subject to increased rents. However, many shop owners did come to informal agreements with landlords, while others went into examinership and agreed new deals on rent.

One of the more recent examinerships was Debenhams, which exited the process after securing reductions on its rent with landlords, which included the Roche family of Roches Stores. Debenhams had claimed upward-only rents were one of the reasons that chain was no longer viable in Ireland.

"Now that we are witnessing increased sales activity in the property market it is galling to see some auctioneers advertise properties highlighting the fact the leases attaching to them contain upward-only rent reviews," said Fitzsimons.

"Retail lost in excess of 75,000 jobs during the recession and many retailers have just started to get back on their feet but Brexit and consequential sterling devaluation is starting to have a detrimental impact. To exacerbate matters further, these leases are crippling retailers who badly need a break.

"Retrospective legislation must be introduced to address this issue before more retailers close up shop and jobs are lost," he added.

The 2011-2016 Government decided against abolishing historical upward-only rent reviews after seeking advice the attorney general.

In the UK, British fashion company Jaeger last Friday filed notice to appoint administrators at the High Court, putting the future of around 700 employees into question. The brand is stocked in Irish stores and also has a outlet in Kildare Village. Jaeger's debt was bought by an undisclosed buyer last month.

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