Thousands of UK shops left empty as high street crisis deepens

FT News


High streets are in crisis. Struggling retailers are forced into bankruptcy and the property market has a huge excess space patriot Dunkin's discusses what has caused this. And if there is a remedy with Judith Evans, our property correspondent, and Jonathan Ely are Rita correspondent. So Jonathan Devon's is the latest in a string of retailers to fail as customers desert, the traditional high street shops have bad are things at Dem's. Pretty bad at debit and have been for some time. I think the customer offering has not really kept pace with fashion, and they have the problem common to many retailers wants owned by private equity groups in that they have an enormous store estate far too much space that's letter high rents and on very inflexible leases. So in some cases that tied in for twenty thirty years with no real prospect of reducing that commitments except by doing CVA process. Which is of course, what they have done. This is the company voluntary arrangement, which is basically managed liquidation in the sites is a form of insolvency. Yes. That basically imposes some losses on creditors. If seventy five percents or more of creditors votes in favour for its in reality. The critics who lose out tend to be landlords who have to accept reduce rents and store closures short notice and for the most part of the creditors gets off Scot free. Although interestingly in this case, Deb. Says also asked that local authorities in some cases, take a bath on the business rates that they receive are they likely to succeed in that. And how Representative is this of what is happening. More broadly on the highstreet. So I think very important points to make about CVS is whether they succeed or not depends on whether there's a restructuring plan on a business plan to go with it. It's no good just cutting your rental obligations and your costs for few years in the hope that that will save business. If you're products offering is not resonating with customers, and your sort of fashions tired and your stores are in the wrong place. CVA will not help you much. You have to have another plan on his for that reason. Many companies did see as ended up failing. Anyway, we'll withstood a sceviour, and then failed HFS did toys a roasted and you'll prediction on Dublin's. I think they will carry on for another perhaps year. Oh, two. I think I would give it fifty fifty whether they go into administration again. And if that does happen, then I think Mike Ashley will buy them out. It. Well, we'll hold that prediction. Mike Ashley echoes is slightly controversial founder of the sports direct retail chain and owner of Newcastle. United football club Judith, just to bring you in here as jumped in with saying, obviously, one of the big victims in this whole type of process is the landlord sector if you like the CVA structure that is used by retailers to restructure. Their leases can be pretty penal for the landlords of the landlords. Brought this upon themselves by being too greedy up to that. Well, that's one point of view, and I would say that landlords are rapidly discovering that they're in a new world. I'm they had previously been able to sign these leases which would loss for decades, which would include up would only rent reviews on which to some degree meant that they could just kind of sit back and watch the money roll in. They would do a credit check on the tenant, and then to some degree that was my work done. That's not the case anymore. And indeed this rush of CVS has really couldn't question the value of leases in the value of retail properties. Because suddenly you can't look to this income stream in. The future almost from any store, given the level of the evils of the moment. So I think there's a sense in the property industry that this current meltdown has quite a bit further to go. There are very few shopping centers trading at the moment, our record, low number of shopping centers, changing hands, and those that are changing hands off and actually as redevelopment opportunities to be demolished and transformed into housing. So I think there's a sense that we're quite far from that market bottoming out and even the landlord which owns some of the best shopping centers in the country listed groups like HAMAs on an into a kind of wrestling with what to do with their future trading at steep discounts to the book value of their assets. So it's not looking pretty we had the former chairman of amongst Spencer. Robert swan all telling us he thought he was even bleaker than your assessment here hero this. I think suggesting that the future. Yes. There is a future for the British tree. If you like, but that is going to have to be a total resetting of both rent. It's and rates to bring in Jonathan's pointed about cancels taking bath as well. And that this is going to be felt over the next year or two with a pretty steep decline in

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