Sainsbury’s and Morrisons among mults using stability to negotiate cheaper rents

Sainsbury’s and Morrisons are among retailers to have renegotiated lower rents from landlords during a period of instability among other retail sub-sectors, The Grocer has learned.

Retailers have faced increasing costs and falling demand on high streets, and the more successful ones have sought to use their stability to seek a quid pro quo for the income certainty they give landlords.

Property experts told The Grocer the emphasis appeared to be on lowering rents in return for abandoning break clauses, lengthening lease terms, or even providing rent-free periods for retailers that gave landlords confidence.

“Where the supermarkets have something to bargain with, whether that be a short lease term or a break option, then landlords generally are prepared to agree reduced rents,” said Matthew Hobbs, Colliers International head of retail - lease advisory.

He said Colliers had renegotiated “a substantial rent reduction with Morrisons in Dover in return for removing the forthcoming break option for the lease”.

A similar concession had been achieved for Sainsbury’s in Nuneaton, Warwickshire, he said.

“It was agreed Sainsbury’s would take a new reversionary lease for 10 years following expiry of the existing lease in five years’ time so the landlord would have 15 years of certainty.

“They agreed to settle the rent review which was outstanding from September of this year at nil increase and at the next review in five years’ time there would be an upward or downward rent review, and Sainsbury’s received 10 months’ rent free.”

Sainsbury’s wouldn’t comment “for competitive reasons”. Morrisons said: “We don’t comment on commercial negotiations.”

Joanne Fearnley, partner at legal firm Gordons, said: “This negotiating power comes from significant changes in the retail landscape over the past two years.

“The result is the number of tenants currently active in the market has declined, particularly among larger and multiple retailers. This presents an opportunity for those who are willing and able to adopt a bullish stance.”