Tough talks ahead

Property doesn’t often take a high priority in retailers’ results announcements, but it was interesting to see HMV making the point that 42% of its leases expire within seven years when the company announced its full year results last week.

While there is still further to go, leases have got shorter and increasingly retailers aren’t locked into onerous terms where the only question is how far upwards the rent goes when the review comes around. That’s good news for companies like HMV whose markets are changing rapidly.

HMV and Waterstones are both desirable tenants for shopping centre owners and nowadays are the only show in town in both their markets. And while plenty of people say that physical entertainment and book retailing are living on borrowed time, right now they’re still important to the tenant mix of any shopping location of significance.

Group chief executive Simon Fox was clear last week that flagging up the lease expiries isn’t about closing stores, but getting what he feels are the right deals for the ones HMV Group already has. “It’s not our intention to come out of any stores,” he said. “We have a tiny number of unprofitable stores across the estate. We’re seeking rent reductions rather than exits.”

So while the news could be worse for landlords, they will still find themselves caught between the devil and the deep blue sea. There are no easy answers, but it’s inevitable that some very intense negotiating is going to be taking place over the next few years, and there is still more pain to come for retail property owners.