‘Landmark CVA vote must usher in a New Look for retail rents’

“We look forward to working closely with our landlords and all creditors to ensure we can navigate the uncertain times ahead together,” Oddy said. 

“Working closely”. “Together”. That will be crucial, not just to New Look’s transformation plan, but to the future of physical retail in the UK.

For far too long now, the relationship between retailers and landlords has been strained, to say the least. 

Even ahead of New Look’s CVA vote today, there was dissent in the property owner ranks. The British Property Federation (BPF) hit out at New Look when it launched the restructuring plan last month, claiming the fashion retailer was using the mechanism “to permanently rewrite its leases”, rather than doing so as part of a “time-limited” rescue plan. 

BPF chief executive Melanie Leech insists landlords are “increasingly supporting turnover-based rent models underpinned by collaboration and transparency”, but that CVAs “should not become a mechanism to enforce this”.

In the wake of the vote, Leech added that CVAs were now “wrongfully being used as a weapon by businesses to rip up leases permanently”.

“The simple fact is that New Look didn’t want a second CVA any more than its landlords did. It only launched one because it felt it had no other option”

Although the latter is not strictly true – New Look says that after three years of the CVA it will pay whichever is higher, turnover-based rent or market rent – Leech is right in other ways.

CVAs cannot become the modus operandi for retailers seeking a switch to turnover-based models, and there has to be transparency and collaboration baked into lease negotiations. But now property owners must back up her words with action. 

The simple fact is that New Look didn’t want a second CVA any more than its landlords did. It only launched one because it felt it had no other option.

If property owners genuinely want to avoid more CVAs of the same sort, they have to work with retailers to reach lease agreements that work for both parties. Today’s vote has to provide the catalyst for that to happen.

In theory, that shouldn’t be too difficult. Landlords might not have been 100% happy with the terms of New Look’s CVA, but there is growing recognition that turnover-based rents are the future of commercial property agreements. 

New Look’s high street neighbours will no doubt be knocking on landlords’ doors asking for similar terms in the coming days. That has to mark the start of meaningful, constructive and ultimately future-proofing dialogue.  

New Look warned that it was effectively CVA or bust prior to today’s vote. No other retailer will want to leave its very existence dangling by that sort of thread if it can be avoided.

“Turnover-based rents have worked for retailers and landlords in parts of continental Europe for a number of years. Indeed, they are long-established in outlet centres across the UK”

And it can be, so long as both sides work through this challenging period together by sharing ideas, sharing data and ultimately sharing in the success when retail comes through the other side of the coronavirus crisis, which it will.  

Turnover-based rents have worked for retailers and landlords in parts of continental Europe for a number of years. Indeed, they are long-established in outlet centres across the UK.  

At a time when the pandemic has battered store sales, and businesses aren’t exactly queuing up to fill high street voids, such agreements must now become the norm in towns, cities and shopping centres across the country. 

It is a model that can shift the retailer-landlord relationship almost overnight, from strained to symbiotic.

Property owners, more than ever, have a vested interest in their tenants’ performance, and therefore want to invest in establishing an infrastructure that will allow businesses to attract footfall and drive sales.

Retailers, for their part, should be willing to share customer data with their landlords – and share in the financial success – if they are genuinely working together to grow revenues. 

That is already happening in parts of London. Covent Garden landlord Capco said in July that it would move to turnover-based rents on a case-by-case basis, while Cadogan, which owns commercial property in Chelsea, is now charging hospitality businesses rents based on their sales performance. 

That theme of togetherness – in households, in communities, in businesses – has proved a silver lining of the lingering coronavirus cloud. 

Now it’s time for retailers and landlords to embrace that culture and usher in a new era of retail rent agreements. As New Look has warned, their futures depend on it.