Hard-pressed retailers pushing to cut rent to landlords by 50%

Germany’s Retail Trade Association - Handelsverband Deutschland (HDE) - is digging in its heels on the sensitive issue of rents, arguing that stores that were forced to close during the Corona crisis should only pay 50% of their contractually-agreed rents. Among other demands it is advocating amendments to the tenancy law to embrace risk-sharing between tenants and landlords in such exceptional circumstances.

In an interview with trade magazine TextilWirtschaft, HDE managing director Stefan Genth clarified what risk sharing means in concrete terms: "It is clear to everyone that it will amount to sharing the costs. It will not be legally possible to cancel rents completely. But our retail traders, as tenants, have a right to rectification. The landlords must release the tenants from half of the rental costs. Otherwise the traders will be sitting on huge mountains of debt. That's our legal position, which we consider is pretty strong.”

There are, of course, retail traders who think 50% is already too much. "In principle, the rent should be reduced in line with turnover. If that's zero, the rent should also be zero," a managing director of a chain of clothing stores was quoted as saying. He is in favour of making a certain payment to the landlord, "a basic amount, such as 10%" even when stores are in lockdown, and then, after the Corona closure is lifted, rents should be adjusted downwards to the likely new lower turnover. 

Giant clothing retailer C&A has already argued this position in a letter to its German landlords. It has declined to pay rent for its 450 stores for April, is demanding “rent adjustments” for the period after the corona lockdown, and is threatening landlords with the closure of their stores where landlords prove immutable. C&A, which is owned by Dutch-German family Brenninkmeijer (which also owns real estate developer Redevco), will find its actions are being watched closely by an army of smaller retailers pondering their own next steps.

Germany’s real estate lobby group ZIA is not committing itself to an ideal percentage of rent it believes is due to landlords.  In a recent telephone briefing with journalists including REFIRE, ZIA president Andreas Mattner said. "We don't want to make a blanket statement about what burdens the partners have to bear. The decisive factor is the neediness of the tenants." 

Iris Schöberl, chairwoman of the ZIA's retail committee and in her day job CEO of Munich-based BMO Real Estate Partners, said in the same briefing she does not want to specify either, preferring to see contractual partners to "negotiating individually".