B&Q’s rent renegotiation with British Land is a grown-up way for retailers and landlords to face up to the downturn.
One irony of the tough times both the property and retail industries find themselves in is that it’s the bad tenants which have done best out of them.
While companies which have been the subject of pre-packs and company voluntary arrangements often get to stay in the same stores on much improved terms, the good tenants which pay their rent on time and are in no danger of going bust are still on the same leases with the same upward only rent reviews.
So it was heartening to see B&Q’s deal with British Land last week, where the retailer was given a 10% reduction in rent in return for signing new 20-year leases with no break clauses.
The retailer pays less in rent, which is obviously a positive, but the landlord also wins because it means it can be confident that the stores involved are going to remain let to a very strong covenant for the long term.
Now, the fact that B&Q was approaching its break clause on the previous leases probably helped make up British Land’s mind.
But the reality is that in the current climate no landlord wants a good tenant to walk away, particularly not one which dominates its category in the way B&Q does.
These sorts of conversations are painful for landlords, but not as painful as having an empty shop.
In this market, the real value in prime retail property is as much in the quality of the tenant as the odd pound extra in rent, and that’s where retailers like B&Q hold the cards.