One third of stores entering CVA switch to monthly rents
Research from Savills shows that almost a third of all units that enter into a CVA have switched to monthly rents, rather than seek rent reductions or planned closures
As the retail industry faces a well-documented rise in the number of operators undertaking company voluntary arrangements (CVAs), research from Savills gathered since January 2018 shows that almost a third of all units that enter into a CVA have switched to monthly rents, rather than seek rent reductions or planned closures.
The data shows that 30% of stores that have been impacted by a CVA, administration or liquidation have only switched to a monthly rent so far in the process. Conversely, 24% of affected units have been earmarked for closure, while 37% have sought rent reductions in some capacity. Research from Savills into the impact of CVAs, administrations and liquidations on the retail market has found there has been a larger impact overall in the in-town sector in terms of the number of units affected (with a total of 2,683 units affected in comparison with 1,522 units out-of-town).
However, despite these high numbers, only 539 in-town stores have been earmarked for closure, representing 0.5% of the in-town market as whole. Likewise, 527 stores are set to close out-of-town, representing only 1.3% of the entire out-of-town sector.
Analysis from the real estate advisor has also found that within the out-of-town retail market, of the 527 store closures proposed for 2018/19, 14% (74 stores) continue to remain open and trading with the same occupier. This is often due to the retailer having agreed new, more favourable terms with the landlord or because the occupier is trading rent free and is likely to continue to do so until the landlord exercises the break to re-let the unit. Of those that have closed, 102 sites have already found a completely new occupier.
Out of town retail director at Savills, Dominic Rodbourne said that it is no secret that the retail market remains challenging, and whilst the number of stores impacted by CVAs, administrations and liquidations has grown, the number that are earmarked for closure represent only a very small proportion of the market as a whole.
Rodbourne said that as the industry continues to be impacted by the challenges facing the sector, it can be expected that more retailers look to reshape their estate whilst they work to adapt their business to meet the expectations of today’s consumers.
Sam Arrowsmith, associate director in the Savills research team, said that CVAs continue to dominate the current retail landscape, and it is interesting to see the split in terms of retailers opting for monthly rents, rent reductions or closures. Each option will impact landlords in different ways, as whilst monthly rents may seem the more favourable option, the process of collecting payments on a monthly basis will still have an effect on a landlords’ cash flow.