The reopening of non-essential shops will result in disappointing sales, paving the way for months of deadlock with landlords over unpaid rent, agent Colliers has predicted.
As non-food shops reopen from today, more young people would be attracted to high streets, but their principle motive would be to socialise, and their spending power limited, according to Colliers co-head of retail agency David Fox.
Meanwhile, older people with more spending power are predicted to stay away for fear of exposure to coronavirus.
“We anticipate that the younger demographic will take advantage of the lifting of restrictions to socialise and visit retail destinations, but not necessarily with that much spending power, while the older generation will take a more cautious approach due to the risk of exposure,” said Fox.
Figures from the British Property Federation suggested retail only paid around a third of its £2.5bn quarterly rent bill at the end of March. After three months without trading, doubt hangs over the ability of many businesses to pay the next bill, due by 25 June. Meanwhile, the government has yet to announce any extension beyond 30 June to temporary protections against evictions and other legal action by landlords.
The government is working on a new ‘code of practice’ for negotiations between landlords and retailers, which is due to be published in time for the next rent day. The British Property Federation, which is helping draft it along with the British Retail Consortium and UKHospitality, has welcomed it as a sign of the responsibility for debt shifting back to retailers.
However, retail sources have questioned the code’s ability to find solutions where shops have seen turnover disappear. All the industry bodies involved have called for a grant scheme to make up the shortfall.
Fox said many landlords would continue to resist shouldering the debt, setting the stage for months of uncertainty.
“From a real estate perspective, a large proportion of landlords will continue to resist committing to deferring or writing off rental arrears until the effects on turnover of reopening under restrictions can be understood,” he said.
“It will be unrealistic to expect those retailers who have effectively been closed since March to meet financial commitments without the benefit of normal transaction levels. This will continue to have ramifications for the months ahead and set the template for the future of retail in the UK.”
The BPF is demanding no extension to protections for tenants after 30 June, while retail bosses say they must go on longer to avoid decimation of the high street. “I would be amazed if it wasn’t extended,” a source told The Grocer.
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