Retailers in upward rent review anguish

Upward rent reviews by landlords are causing problems for UK retailers in this difficult market. Amongst the most anguished is French Connection, chief executive, Stephen Marks. He has warned of the damaging impact rising rents are having

on retailers, especially when signed up for approximately 15 year leases. Marks has gone as far as to ask the government to re-look at laws.

It comes as the high street retailer sees a sharp profit rise but a struggling UK retail arm. The UK and European operations of French Connection recorded a grand loss of £1.6m for the year to 31 January, which happened also to coincide with a rent review on 12 of its 74 UK stores.

Marks has seen the fickle end of the fashion business, ‘one minute a store is profitable, the next it is not,’ he says. ‘Rent review normally goes up by around 20 percent.’

Marks is no doubt not alone. Upward only rent reviews, part of the Landlord and Tenant Act of 1954, are a constant point of conflict. Whilst retailers quibble at upward rents, landlords condemn the right of retailers to renew leases automatically, and therefore deny them of prospectively ‘better’ tenants.

It’s a world away from the Cool Britannia times of the late 90’s and 2000, where the parlous state of the property market meant no rent review increases. And in those days, retailer’s set up a lobbying group – the Property Managers Association – to form a united defence, gathering evidence against landlords looking to up rent, which no longer is seen as strong enough evidence in the High Court.

However, last year, the Irish government banned upward rent reviews on all new retail leases whilst the British Retail Consortium (BRC) said they would ‘gather evidence’ from their members on this issue.

French Connection does, however, as Mr Marks notes ‘unusually remain a UK company which is actually a global
brand.’

The company is hoping for improved retail performances towards the end of the year.