Some property owners are more exposed to the fallout than others.
The UK’s retail property sector was hammered by three big corporate casualties last week, even as the country’s shopping centers began reopening after another lockdown. Two of them occurred on the same day: December 1. First, the fashion retail group Arcadia — owner of brands such as Topshop, Burton and Miss Selfridge, with 422 stores in the UK — crashed into bankruptcy. Hours later, the 242-year old department store Debenhams, with 124 stores in the UK, and which had already entered administration twice since April 2019, went into liquidation, after its last remaining prospective buyer, JD Sports, lost interest and walked away from rescue talks. This came just a day after women’s fashion retailer Bonmarche Ltd. filed for administration, putting over 225 stores in jeopardy.
Debenhams will now be closing all of its stores while it remains to be seen how many of Bonmarche Ltd and Arcadia’s stores will be shuttered. One thing is for sure: an even larger hole is about to be left in the UK’s already decimated retail property landscape.
Between them, Debenhams and Arcadia rented a grand total of 16.6 million square feet of store space, with the former accounting for more than 11 million square feet, according to Estate Gazette’s Radius Data Exchange.
Over 28 million square feet of retail space has already been permanently shut so far this year in the U.K. That’s nearly eight times the total amount shut (3.6 million square feet) in 2019 and over double the amount in 2018 (12.1 million square foot). And the 2020 figure doesn’t even include the fallout from Debenhams’ demise and Arcadia’s bankruptcy.
Some property owners are more exposed to that fallout than others:
- Hammerson Plc, the U.K.’s largest specialist retail landlord, which was forced into an emergency share sale in July, rents 16 stores to Arcadia and two to Debenhams covering 330,000 square fee.
- British Land Co. and Land Securities Group Plc, two of the UK’s three largest REITs each have 10 Arcadia stores and 3 leased to Debenhams.
- Capital & Regional, a much smaller REIT whose shares have collapsed over 90% since 2015, reports Debenhams as a top tenant, with three of the retailer’s stores accounting for 2.38% of the landlord’s contracted rent.
It won’t be easy to find new tenants for these stores considering the current economic climate, not to mention the overhanging threat of more lockdowns. Debenhams’ stores will be particularly hard to re-let, given their size and higher running costs. A quarter of the 160 stores vacated by BHS when it hit the wall in 2016 are still vacant.
Continue reading the article on Wolf Street
Nick Corbishley 