Rent day approaches for High Street shops

June 24th is the day that many High Street shops pay their rent. Many may not be able to do so.

Indeed many shops were trying to negotiate reduced rent levels, even before the COVID19 crisis.

Intu, which owns or part owns 17 UK shopping centres, lost £2bn in 2019 and now has debts of £4.5bn. In March, with lockdown still in its early stages, it only managed to collect 29% of due rents. Now it is trying to negotiate payment breaks with its lenders.

The Government has stopped landlords from taking out Court Order or Winding Up Orders against shops and brought in a 3 month moratorium against evictions.

This means that landlords are in a weaker position when talking to the stores.

Many stores have forced landlords to agree to defer rents until next year. That will give the stores time to recover, but it is difficult to see how many of them will be able to pay when the rents become due in 2021.

Many stores have also been unable to pay service charges which cover cleaning and security. These services will be vital when the shops reopen.

Even stores that have been able to remain open are renegotiating agreements with their landlords. An example is Boots, which says that takings are down, even though its stores are open.

It seems that some things will have to change. Property values on the High Street are not as high as they were, and landlords cannot expect upward only rent revues to continue. Some rents may have to be reduced. One possibility is for future rent agreements to be based upon the income that the stores actually generate.