Reserved Is The Only Game In Town When It Comes To Retailers Expanding

The excitement was palpable, the symbolism in your face.

A new international retailer, Poland’s Reserved, was opening on Oxford Street, with plans to expand in the U.K. It took part of the former flagship store of BHS, the U.K. department store that collapsed into administration last year, in a high-profile event fronted by model Kate Moss. A symbol of hope for the U.K. retail property sector?

Alas no, for Reserved represents just how tough the retail leasing market is, especially in the fashion sector. Canvassing retail leasing agents, it is pretty much the only name that comes up in conversations about retailers with significant expansion plans.

Reserved has some big hopes for the U.K. Owner LPP has invested big in the Oxford Street store as part of an international expansion plan, taking a 10-year lease with total rent commitments of £42M.

It is already eyeing stores in other parts of London, including the two Westfield shopping centres at Stratford and White City. If London is a success, it has said it could open dozens of stores in major cities around the U.K., not just for Reserved but for LPP’s four other brands also.

But the retail sector has looked with optimism at overseas brands expanding in the U.K. in the past few years only to be disappointed. American Eagle, Banana Republic and Forever 21 have all launched with big plans only to exit the U.K. recently.

“I know, I know,” Reserved co-founder Marek Piechocki said at the brand’s launch when this litany of failures was put to him. “But when you look at these American companies they are offering a classic look with a college style that is more or less repeating forever. The European customer is completely different. I believe we are one of the European leaders in fashion-forward clothing.”

Retail property owners will be hoping he is right, because there are few other retailers looking to expand in the U.K. and a combination of long-term and short-term issues are making the market particularly tough.

The impact of e-commerce and the consequent reduction of need for physical retail space is well-known. But retailers in the U.K. are also facing a rise in costs because of the fall in the value of sterling post-Brexit. One-year inflation hedges put in place by retailers before or just after Brexit are now coming to an end, meaning their costs are rising and margins reducing.

“The leasing market is challenging at this point in time,” Harper Dennis Hobbs head of U.K. agency Dan Hildyard said. “Retailers are still considering the top shopping centres and town centres but it has to be on the right terms. It becomes much harder in the next tier down as many retailers are reconsidering their store portfolios and if their lease is coming to an end, landlords are increasingly required to become more flexible.”

Beyond fashion, even those retailers in the discount sector that have been expanding rapidly in recent years, such as Poundland, are taking a pause to review their requirement, brokers report.

All eyes on Reserved, but do not hold your breath.