The demise of the high street has led to a large number of companies going into administration in the past couple of years including Woolworths, Jessops and more recently HMV. Many blame the fact that more people now choose to do their shopping online instead of visiting stores, which is not only changing the face of the high street but also the commercial property sector for the worse.
Over the past year we’ve seen many news articles that discuss how local councils are trying to work with commercial property landlords in order to either convince them to lower their rents or find tenants for empty properties. However, many landlords claim that reducing rent prices would lead them struggling to pay for necessities such as landlord insurance as well as maintenance and repairs, while others are concerned that as the high street is currently in such a decline letting out an empty property could actually lead to them losing money.
Now it has been announced that Aurora Fashions who own clothing stores Oasis, Warehouse and Coast are looking to their landlords to decrease their rent prices or shut down their stores. Aurora’s chief finance officer, Richard Glanville, said: “We are seeking rent reductions and, if these cannot be attained, then we will pull out of stores. Fashion retailing is increasingly going online and times are extremely tough for bricks and mortar operators. We are reviewing our entire store portfolio and are in daily discussions with landlords. We want to reduce our store portfolio in the UK by 25 per cent over the coming years.”
Aurora’s profits fell by 15.3 per cent to £12.7 million in the twelve months up to February 2012, which is one of the reasons why the company is looking to downsize. However, 75 per cent of their company is owned by the Icelandic bank Kaupthing, and credit insurers for the company have recently decided to scale back cover for the retailer’s supplier base and put the company on a watch list so they can closely monitor how the company fares over the next few months.
Discussing their credit insurers’ decision, Mr Glanville said: “Credit insurers are reducing their exposure to the retail market generally and we are no exception. However, we have very longstanding relationships with a limited number of suppliers and have not experienced nor anticipate experiencing any issues in our supply chain.”