Global fashion players operating stores in Europe’s shopping centres and high streets will be demanding, even enforcing in some countries such as Spain, rent holidays over the next few months as COVID-19 continues to take a greater hold, says GlobalData, a leading data and analytics company.
Honor Strachan, Principal Analyst at GlobalData, comments: “Landlords will be at the mercy of retailers with scale, as they will be forced to rely on these tenants to bring shoppers back post crisis – providing the centres can survive following a challenging 2019.”
Intersport, KiK, Deichmann, H&M and Sport 2000 all had over 2,000 stores across Europe in 2019, making them the most exposed to quarantine restrictions and mall closures caused by the spread of COVID-19. But with annual sales of over EUR2.0bn each these players have the scale to negotiate new terms with landlords, and will be working hard to cut costs throughout the supply chain to protect profitability.
Strachan continues: “Following retailer demands in China, Hong Kong and Singapore, European landlords will now face requests for three or six month rent cuts, rent holidays and rent rebates from its biggest tenants to aid survival as consumer spending severely drops off.”
This trend will escalate with smaller players following suit once the benchmark has been set by those with influence. The likes of Intu, Hammerson, Unibail-Rodamco-Westfield and Kleppierre will therefore be under even more strain to raise funds, reduce debt and protect the performance of their assets.
Strachan concludes: “We expect the steps to reduce rent and close stores temporarily, or reduce daily trading hours, will make retailers with a large physical store presence consider long term store closures and portfolio rationalisation, particularly as online penetration continues to build across Europe. This will lead to higher vacancy rates through European towns and cities, and the shrinkage of the indoor shopping centre/mall channel over the next few years as major anchors withdraw from underperforming locations.”