As August draws to a close, the property industry has its fingers crossed for an active autumn. While August is always a quiet month for property, the industry is nervous that all the deals that retailers had cautiously been progressing before the summer break will, like the summer, fail to materialise.
The property industry has come back from its holiday in trepidation. The wet weather piled further woe on struggling retailers and even those that are in the black are treading carefully. This will mean those deals that are in the pipeline will be scrutinised more intensely than ever.
Retailers will have their names pencilled on letting plans up and down the country and September is the time when landlords need to convert those deals into signings. Yet the trend for retailers to hold off for months rather than weeks is continuing. Nowhere is this more apparent than schemes such as Grosvenor’s Liverpool One orWestfield’sWhiteCitydevelopment. Both letting plans are brimming with names, but few are set in stone. Both schemes – combining 3.2 million sq ft (297,280 sq m) of space – are also counting down the days to their openings next year.
Retailers’ nerves have not been helped by this summer’s corporate failures, such as Fopp and just last week, Choices UK. Although many would argue they could have predicted the failure of Fopp as it expanded too quickly, its demise shows the frailty of even great brands.
Prior to Fopp’s acquisition of Music Zone, it expanded rapidly over a period of about 18 months and landlords offered healthy packages including up to two-years’ rent free. Once this rent-free period was over, Fopp started to waiver and with the added burden of the Music Zone stores, it couldn’t keep afloat.
Such failures have forced retailers to re-assess their expansion plans. Many are clearing out the chaff in their portfolios already, but in future, as landlords desperately seek new retail blood, incentives such as two years’ rent free have become the norm.
And while retailers may have seemed keen on the package before summer, they are increasingly looking ahead to when those rent-free periods are over. If they haven’t managed to shift the stores they don’t want, they may well hold off further before committing to others.
And with more stores increasingly coming to the market – such as Choices UK’s 160-strong portfolio – the chances of offloading poor performing stores are getting slimmer. That, in turn, could well make converting retailers from pencil to pen very difficult.