Corona crisis: retailers negotiate store rents and payment terms

Corona crisis: retailers negotiate store rents and payment terms
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Now that stores in Belgium and elsewhere are obliged by law to remain closed, retailers are looking at how they can compensate for the loss of sales. As part of this, they are looking at rental contracts, payment terms and other agreements with suppliers.

 

Orders cancelled

The financial consequences of the corona outbreak are disastrous for non-food retailers. They see their turnover disappear, while fixed costs continue to stack up - and many companies in the sector were already struggling. For the employees, there is the solution of temporary unemployment, but rental contracts and agreements with suppliers can not be cancelled. An untenable situation: a lot of retail managers are at their wit’s end.

 

Various suppliers are now being asked by their retail clients to show solidarity, they told RetailDetail. By asking for payment terms to be extended, they hope to bridge the mandatory closure period. Orders are being postponed or simply cancelled altogether. Certain seasonal products and collections, for example, are likely to be less relevant within two months. After all, no one today has any idea when the sale will be able to resume.

 

"Joint responsibility"

Moreover, several stores are asking their landlords to review or drop the rent: H&M, among others, has already published a statement on the subject: "For H&M Group, this (the corona crisis, red.) has resulted in the closure of multiple affected stores in various cities and countries and a large drop in traffic in many locations. We see it as a joint responsibility between us and our partners to ensure a financially stable and sustainable future for our businesses. Therefore we ask relief on the rents and charges during this period." Debenhams, an ailing department store chain, is even asking for five months’ rent compensation because of the pandemic.

 

As a result, most real estate companies are now seeing their share price fall sharply: investors are wondering whether tenants will be able to pay at all. Belgian Retail Estates, however, does not seem to be panicking yet: the rents for March have already been paid, so there will be no impact from the coronavirus for the financial year 2019/2020, which closes at the end of this month. What happens next is uncertain: the company is already allocating 45,000 euros to help its tenants bridge the compulsory closure. However, there is the risk that prolonged closures will also trigger bankruptcies, especially in the fashion sector, which is already struggling.

 

France: "Do not charge rent for April."

In the Netherlands, retailers are going to request three months' rent deferral from shop owners via their sector organisation INretail. Real estate investor Wereldhave has announced that it will look on a case by case basis how it deals with tenant obligations. In Italy, the government decided that shopkeepers who are seeing their income disappear do not have to pay rent to the owner.  In Belgium and the Netherlands, that is not (yet) the case. 

 

In France, the government is calling on shop owners to drop the rent before April. It is an advisory, not a mandatory measure. Five trade federations feel that such a non-committing call does not go far enough: they demand the suspension of the rent for the entire period of the store closures and the refund of the rent for the week of 14 to 21 March.