Department stores considering a wide range of uses to fill vacant spaces – Andrew Denye speaks to Property Week

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Partner and Head of Retail, Andrew Denye, has been quoted in a Property Week article discussing the wide range of uses former department store owners are considering to fill the vacant spaces.

This April will mark eight years since the high-profile collapse of BHS. With all 167 of its shops closing, it proved to be the tip of the iceberg for department store chains and their problems. Since then, Debenhams and House of Fraser have suffered a similar fate, albeit not a complete wipeout, while long-established chains such as Beales now only operate a couple of sites.

So, what has become of these properties and what are the challenges their owners face in repurposing some of them?

For Andrew Denye, head of retail at law firm Forsters, it is simply the scale of the buildings that has left some landlords struggling to find a way forward. “It took a while for landlords to work out what on earth they were going to do” he says. “Some of these spaces are bigger than shopping centres. That’s a very big hole to fill.”

Denye has already spotted an uptick in department store deals coming through. “We’ve got more big-box deals on our books than at any point over the past 10 years. There’s been a really positive uptick in people looking at these spaces.”

Originally published on Property Week on 1 February, the full article can be read here behind the paywall.

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UK retail weighs up government’s economic gamble – Andrew Denye speaks to Drapers

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Head of Retail, Andrew Denye, recently spoke to Drapers about the implications of the UK government’s mini-budget for the fashion retail industry.

While certain elements of the tax-cutting mini-budget have since been reeled back or cancelled, certain elements key to the retail sector remain, such as the scrapped plan to increase corporation tax from 19% to 25%.

Opinion is divided within the fashion industry as to whether such measures are enough to stimulate the economy, with some citing the need for a proper stimulus; free trade with Europe and a windfall tax on energy companies.

Energy prices indeed seem to be the key concern of fashion retailers, with some stating they are expecting up to a four-fold increase in energy prices and others, Denye explains, postponing the opening of new shops because of these fears.

Andrew said: “This is unprecedented, at least not since the 1970s – retailers are pulling out of new leasing deals because they don’t think they can afford the energy bills, not because of rents or business rates.

We’re likely to see shops turn down the temperature, dimmer the light and even reduce opening hours.

The energy cap announcement will have offered some in the retail and hospitality sector a bit of breathing space to trade through the Christmas period. While it does provide some respite, it doesn’t deliver long-term security or enable businesses to plan beyond that timeframe.”

This article was first published on 27 September 2022 in Drapers and is available to read here in full.

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Landlords on alert as Cineworld collapse raises spectre of widespread closures – Andrew Denye speaks to CoStar

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Head of Retail, Andrew Denye, has offered his comments to CoStar News on how Britain’s Cineworld, the world’s second-biggest cinema chain, has filed for bankruptcy protection in the US in a move that has left landlords across the country staring down the barrel of widespread anchor-unit closures.

The group operates 751 movie theatres including more than 500 in the US, as well as more than 100 in the United Kingdom and Ireland. In Britain it also owns the Picturehouse chain.

Cineworld said in a statement that it had filed for Chapter 11 protection, a court-supervised restructuring in the US that gives companies breathing space to negotiate with creditors on debt.

It confirmed it will try to renegotiate leases, while existing management will stay in post.

It added that it aims to emerge from bankruptcy proceedings in the first quarter of 2023 and had secured $1.94 billion in financing from existing lenders.

Landlords across the country will clearly be concerned that a key tenant in major developments is about to exit, or seek to sublet space, with the recent disappearance of department stores such as Debenhams from the high street and malls a worrying precedent in terms of scale.

Andrew says Cineworld appeared to be facing a perfect storm of the dramatic impact of COVID-19 on cinema attendance, followed by the cost of living crisis and finally the problem that not enough “top-notch” films are being produced.

“Then they have a significant amount of debt. And it is almost a classic case of ‘big is not always best’ as they have a huge number of big buildings at a time when for numerous reasons cinemagoers don’t really need all that space. There is talk of a sizeable chunk of money there to help them, but a problem is the market has moved to the high end with Everyman, or lower end, and Cineworld has tracked through the middle to a degree.”

In terms of what lease negotiations with landlords will look like, Denye said Cinewold may choose the company voluntary arrangement route, a method of restructuring real estate in the UK that has been much less used in the past 12 months as market conditions have improved for retailers and leisure operators.

CVAs are legally binding agreements with a company’s creditors to allow a proportion of its debts to be paid back over time and need 75% of the creditors, by value, to support the proposal. For a review of why they have been controversial in the UK and why they have been few and far between recently click here.

What Ever Happened to the Landlord Fight Against CVAs?

“They may go the CVA route which immediately solves the negotiation point as it is what it is. If they try to renegotiate leases, because their spaces are so large they are effectively an anchor so ultimately landlords will do what they can to help them keep the doors open; the alternative is going to be very painful.”

That is because fitting out a cinema is extremely expensive and the auditorium for instance is more difficult to repurpose than for instance department store space.

“It is going to require a sizeable cheque,” Denye agrees. “We will see closures, that is clear, but we also might see them try to carve out underlet portions of space.”

Denye said there is a real prospect of more CVAs again this year from operators.

“I think, that 2021 we saw an improvement in conditions for retail and leisure as people got out and about. But I think the energy crisis will have a dramatic impact and even this week I have seen occupiers put things on pause citing the cost of energy.”

In terms of Cineworld’s likely cause of action Denye says it is too early to tell. “All we know is what they have done in the States, but landlords up and down the country will be expecting a phone call or more likely will be making a phone call. It is a genuine asset management challenge.”
Recently Cineworld was on the losing end of a critical legal battle over COVID-19 rent arrears which will also be a backdrop to negotiations.

London Trocadero and the Bank of New York Mellon were backed at the Court of Appeal in linked landlord test cases against Picturehouse Cinemas and Cine-UK in a decision with major implications for commercial landlords and tenant negotiations in England and Wales.
A three-judge panel dismissed the two claims from the tenants ultimately including Cine-UK and Cineworld. The Trocadero case against Picturehouse Group related to £2.9 million of specific rent arrears owed, but many other landlords and tenants have been awaiting the decision. For a review of three critical cases focused on the matter during the pandemic click here.

This article was originally published on 8 September 2022 on the CoStar website and can be found here (behind their paywall).

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The post-Covid high street – Andrew Denye speaks to New London Architecture

Skyscrapers rise into a cloudy night sky, their windows glowing with interior lights. Nearby buildings reflect on the glass surface, creating an urban atmosphere.

Commercial Real Estate Partner and Head of Retail, Andrew Denye, talks to New London Architecture Curator-in-Chief, Peter Murray OBE, about the challenges and opportunities for the Retail sector and what the post-Covid high street might look like.

A current member of the NLA Expert Panel on Retail and Hospitality, Andrew discusses how the retail industry is in the process of ‘bouncing back’ from pandemic conditions and what might be in store for the sector, with particular reference to the changing nature of the high street, flexible use, and community hubs.

The full interview is available to watch and listen to here.

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Forcing landlords to let empty shops: will it save the high street? – Andrew Denye speaks to React News

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

One in seven shops across the country now sits empty, according to the British Retail Consortium, causing a devasting domino effect on nearby hospitality businesses.

In an attempt to reinvigorate the UK’s high streets and solve the growing issue of unoccupied retail properties, the Levelling Up and Regeneration Bill (to be announced in the forthcoming Queen’s speech) is expected to include plans to force landlords to let out empty shops. But how will this work in practice?

Commercial Real Estate Partner and Head of Retail, Andrew Denye, says, “The policy assumes that there are hordes of landlord out there deliberately choosing not to rent out their premises, as well as an equal number of potential occupiers who would like to take the space, but feel unable to negotiate with landlords, yet somehow would be willing to jump into a completely new concept in this rental auction… My concern is that those two assumptions are just wrong.”

Emphasising the vast costs involved in implementing such a scheme, Denye is concerned that compulsory rent auctions would only work for the “better empty units” as “community hubs and small businesses are not likely to want to take on a unit which requires capital expenditure”.

Whilst fully supportive of local level high street revival schemes, Denye believes a “one size fits all approach” such as this proposed initiative is “very optimistic”.

This article originally appeared in React News on 4th May 2022, available here behind their paywall.

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Forced rent auctions: What property and the government need to know about how this will (and won’t) work – Andrew Denye talks to Bisnow

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Last week, the Government suggested a new plan to rejuvenate the UK’s high streets and tackle the growing issue of empty retail properties: If one such property has stood empty for more than six months, the local authority could force the owner to rent it out.

This idea has been met with scepticism by industry experts, both in reference to its function and its intended effects.

Regarding the key component that local authorities would have the power to upend centuries of private property rights, and the notion of landlords’ autonomy over their own property, Head of Retail, Andrew Denye summarises:

“You are almost saying the local authority would need to have some sort of compulsory purchase order power, but without purchasing the property. If, as being suggested, the landlord is effectively being forced to lease out their property, unless you are talking about changing landlord tenant law, the landlord will still have to enter into some sort of contract or agreement, unless you are taking ownership away from them.”

Andrew shares the view among industry experts that the proposal has an air of political short-termism.

He said: “I keep coming back to this idea of levelling up. For those areas that do need levelling up, I’m not sure they will get anything from this because there isn’t the demand for retail premises in these areas – it doesn’t change the fact that there is just too much retail.”

This article was first published on 27th April 2022 in Bisnow, available here, behind their paywall.

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