John Lewis is seeking to withhold 20% of the service charge it pays shopping centre landlords, in a move that will put more pressure on several listed property companies.
The BBC has reported that the department store chain has told landlords in some locations that it will withhold 20% of the service charge it is due to pay for the fourth quarter of 2019.
A service charge is a sum due under the terms of a lease between a landlord and tenant, towards the costs incurred in providing a range of services for the operation of a building’s common parts.
That could include cleaning, security, maintenance, marketing, heating/cooling and staffing. Tenants are then charged on an apportioned basis relating to the size of the space occupied with larger stores getting a significant weighted discount.
In a statement John Lewis said: “At a time when we are doing everything we can to reduce our cost base, we have unfortunately been faced with regular increases to the service charges we pay for some of our shops in shopping centres.
“Over the last three years we have seen an increase in service charges of 20% and these continued increases are simply not acceptable, particularly in the absence of strenuous efforts by landlords to work collaboratively with us to reduce these costs.
“We are investing more in our current shop estate than ever before to do everything we can to encourage customers to grow footfall to our shops and we hope that our landlords will support us in continuing to do this.”
John Lewis has around 20 stores in covered shopping centres. Intu owns or part owns five shopping centre with a John Lewis store – Cribbs Causeway in Bristol; Eldon Square in Newcastle; Victoria Centre in Nottingham; Trafford Centre in Manchester; and Intu Watford. Hammerson owns or part own three malls – Brent Cross in north London; Victoria Gate in Leeds; and West Quay in Southampton. Landsec’s shopping centre exposure to John Lewis is through its holdings at Bluewater in Kent and Westgate in Oxford.
It is not known which centres John Lewis is seeking the service charge cuts on, but the move could lead to legal action by the property owners to recover any unpaid money. Landlords will be worried other retailers follow suit.
HMSO : INTU : LAND : Mall owners in firing line again as John Lewis seeks to withhold chunk of service charge
will this effect supermarket reit?
Supermarket Income REIT’s tenants at present are Sainsbury’s, Tesco and Morrisons. They don’t have any exposure to Waitrose and even so the measures John Lewis are looking at only effects their department stores in shopping centres. Therefore the likes of Intu, Hammerson and Landsec will be the most effected.
and those secure income ones…