Retailers to feel the pinch as high street rent reviews loom in 2024
By Law News
Property lawyer warns rising rents and inflation may spark more high street retail casualties
According to Rabinder Chaggar, a partner at Clarke Willmott LLP, the outlook for retailers on the high street in 2024 looks concerning due to impending rent reviews and persistent high inflation rates. Many leases held by corporate occupiers are tied to inflation rates, which have been a favorable arrangement during periods of lower inflation and interest rates.
Chaggar acknowledges that while inflation might have temporarily peaked, its sustained elevation above the long-term average remains worrisome. This spells potential trouble for retailers, especially those facing upcoming rent reviews next year.
He notes that despite a downward trend, inflation at 3.9 percent remains considerably higher than the long-term average of 2.8 percent. Until inflation rates normalize, tenants with rent reviews in 2024 are likely to experience significant hikes, impacting their operational costs and potentially leading to more store closures.
Chaggar anticipates that the economic situation might influence how retailers negotiate their leases. While recent years have seen a shift towards linking rent reviews to inflation for cash flow predictability, persistently high inflation and borrowing costs could prompt a return to the older open market system in lease negotiations, potentially causing disputes and commercial uncertainty.