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Quarterday Mayhem

Paul Durkin • 08/04/2020

As the ‘stay at home’ message crescendos, and lockdown sweeps the world, many sectors are feeling the economic crunch. Without the daily hustle and bustle on our streets, the physical elements of the retail and leisure market are facing a state of economic hibernation.

The announcement of government-enforced store closures across the UK was aptly timed for the rental payment date of the March quarter. We have seen a spectrum of responses, and much like the rest of the COVID-19 outbreak it has exposed the extremes of human behaviour, from kindness and support, to greed and fear. 

Some of the more positive stories include one landlord who is supporting its new talent while maintaining the USP of the overall asset by giving complete rent relief to all occupiers in its retail, leisure and restaurants offer. The occupiers - who are new, independent and often stand-alone - form the exciting, vibrant fabric of the asset, and while they draw footfall in normal times, they would be at high risk without these rental breaks.

Some of the REITs have taken a more pragmatic approach, with tiered analysis, offering relief to those who need it, and less (or none) for those who are either big enough to weather the storm, or were already beyond saving. 

This is dependent on landlords being able to offer relief to their occupiers at all. There are some who simply cannot, which brings its own challenges. 

Meanwhile the response from occupiers has been equally diverse and not always aligned with the greatest need. 

One fast-food giant has refused to pay any rent, which – given its £300m profit in UK last year – seems disproportionate in a time of crisis where others are struggling. Many big-brand high street fashion retailers have also refused to pay, leaving the landlords of the country to carry the burden – landlords which include some of our UK pension funds, depended upon by thousands. 

Other occupiers are taking a more reasoned approach and have opted for a compromise: non-standard monthly payments, which gives them the flexibility to review monthly and helps the landlord to survive. 

We should be focusing on where the support is really required from landlords, for occupiers who really need it; organisations who are prioritising paying staff to avoid mass redundancies, and don’t have the cash flow to afford much more. This is only possible if occupiers who can afford to pay, do so, rather than being opportunistic and taking advantage. 

To the highly profitable occupier avoiding rent, the message is much the same as the message to the panic-buyers in the local grocery store: Now is a time for the strong to support the weak and the low risk to support the high risk. If those who are strong are using all the resources, there will be nothing left for anyone – and we all lose.

 

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Paul Durkin London
Paul Durkin

Head of UK&I Retail
London, United Kingdom


+44 (20) 71525001

Paul.Durkin@cushwake.com

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