High Street’s ‘new normal’

House of Fraser saga brings potential risks facing landlords sharply into focus

The financial challenges faced by House of Fraser have recently been front and centre of the business news agenda.

This is not only because it is a familiar name to the public, but also as it follows a number of other high-profile retail failures.

The House of Fraser story has been a fast-moving one.

The latest twist came on August 10 when Mike Ashley’s Sports Direct agreed to buy the department store chain for £90 million.

The deal was announced just hours after the 169 year-old chain went into administration when talks with its creditors failed to reach an agreement.

The whole case brings into focus the potential risks facing landlords, particular in this environment where even large high street retail firms are finding it difficult to compete and survive.

For many years, having a big organisation as a tenant would undoubtedly have been considered a reasonably safe bet, but we now live in a new normal.

Factors including the combined impact of rising costs (rates and wages), low consumer confidence and the Brexit effect on increased import costs has driven more and more retailers to the point of insolvency.

And that’s before we factor in the impact of Amazon and online retail or the underlying failure of many retailers to connect with their customer base.

Chinese firm C.banner had been poised to invest in House of Fraser after it agreed a Company Voluntary Arrangement (CVA) with creditors, which would have closed 31 stores and put 6,000 jobs at risk. But it could not raise the financing. Despite this, we are still likely to see the negotiation of more CVAs.

Whilst this will disadvantage some landlords, others will embrace this alternative to administration and to having to fill a vacant retail space.

For their own reasons, suppliers, shareholders and employees will also see a CVA as the best option for them, allowing a struggling retailer a chance of being able to trade its way out of debt.

The House of Fraser has been bought out of administration.