Apple UK has allegedly asked UK landlords for substantial rent cuts. In an environment where the value of retail space is now a fraction of what it was only 6 months ago, should we be surprised by this?
Q: Is this the start of a new front in the dysfunctional retailer/landlord relationship in the UK?
https://www.thetimes.co.uk/article/apple-demands-50-rent-cuts-for-uk-stores-k7klxmj8h
The Sunday Times is disingenuous in focusing on Apple’s “sales soaring to new heights during the lockdown” – after all 1) these sales aren’t happening in their retail stores (all of their UK retail stores are shut), and 2) not all of Apple’s sales take place in the UK. But this request is additional evidence (if we needed any more) that the value of physical stores to online retailers is lower than it’s ever been.
A better question to ask is what is the real value of commercial retail space in Covid-time, when your ground rent is (usually) based on expected footfall and there is no footfall?
Q: Why should the retailer have to absorb cost of their over-priced leases?
If the value of the retail site has dropped (which it has in practice for most retail sites), how much of this loss should the landlord cover? And how much will the taxpayer have to pay – directly or indirectly – as this gets worked out?
UPDATE
Frasers (formerly SportsDirect) has now threatened to close stores if landlords don’t link rents to turnover. The struggle between retailers and landlords is going to get interesting.