The recent drip-feed of household retail names falling victim to the continued pressures on the nations purse strings reveal the austerity packages introduced by the coalition government could have a dramatic effect on the landscape of the high street.
With stores ranging from Habitat to TJ Hughes calling in the administrators, it is no coincidence that the latest bout all happened on or around the same date, 24 June, being a traditional quarterly rent payment date.
Commentators estimate that nearly 10,000 retail jobs could be lost at the likes of Thorntons, HMV, Carpertright and Comet as they drastically scale back operations and look, where possible, to bring leases to an end especially in less profitable units. Some experts predict that the number of retailers going to the wall could continue to grow throughout the year as public sector job cuts take effect amid fuel and food price inflation.
With supply outstripping demand, retailers which specialise in big-ticket items such as furniture and TVs, as well as those operating on slim profit margins, appear most at risk; especially if tied into onerous lease provisions with upward only rent reviews.
This obviously raises questions for both commercial landlords and tenants across the board. As a commercial property landlord, what can you do when one of your tenants faces financial uncertainty or starts to default on their obligations under the lease? Is it more beneficial to have a tenant in occupation, albeit paying a reduced rent on a short-term lease, or waiting for an upturn in the market?
As evidenced in the last fortnight, tenants due to meet quarterly rent payments see this as a substantial outlay when trading conditions are particularly tough. Both JJB Sports and the care home operator Southern Cross identified this problem and approached landlords to seek agreement on reduced payments and varied terms.
If you are a commercial property landlord or tenant wishing to discuss your rights or obligations under an existing commercial lease or are interested in the advantages of a more flexible short-term lease, the commercial property solicitors at Farleys can provide specialist assistance and advice which may prove invaluable in these turbulent times.