Germany: H&M, Adidas and Deichmann do not want to pay rent anymore

Fashion retailer H&M does not want to pay any more rent for its stores in Germany. The retailer claims that the corona crisis led to the shutdown of all of its 460 H&M stores. “This is why we also informed out German lessors last week that we suspend lease payments until the situation is resolved,” says a H&M spokeswoman.

According to the fashion retailer, more than 3,400 of H&M’s 5,000 stores worldwide are affected by officially decreed shutdowns  since past Monday. The fashion store chain announced that it will suspend lease payments in Great Britain as well.

Also, the sports retailer Adidas, the shoe store chain Deichmann, and many other companies stopped their lease payments for shops that were shut down due to the Corona crisis from April onwards.

Deichmann, Germany’s biggest shoe retailer says they are forced to suspend lease and ancillary cost payments for its 1,200 stores in Germany from April onwards for the duration of the officially decreed and forced shutdowns. “This is a preventive measure to maintain the company’s economic effectiveness.”

Adidas also suspends its lease payments for the time being. “It is true that Adidas, just like many other companies, temporarily suspends lease payments as a precautionary measure, wherever our stores are closed. We are in close contact with our lessors regarding this matter,” says a spokeswoman for the company. Many countries have decreed the shutdown of retail stores to curb the spread of the coronavirus. Adidas will keep its stores in North America and Europe closed at least until March 29, 2020.

Terminations not possible 

In Germany, tenants of residential and commercial properties are still obligated to pay their leases. However, their leasing contracts cannot be terminated due to outstanding payments accrued in the period between April 1 and June 30, 2020 for the time being. With this emergency legislation, the government attempts to prevent that residential tenants lose their home and commercial tenants lose their professional existence. Who falls behind on this payments can settle these outstanding lease payments until end of June, 2022. Lessors and landlords may charge 4% default interest. “We expect that many tenants will and must use this opportunity to suspend lease and rent payments,” says a spokesperson for Hamburg’s shopping center investor Deutsch Euroshop. 

Deichmann:Government should cover losses in rental revenue

However, tenants and landlords hope for further support from the German Federal Government. The group announced that Deichmann expects the government to cover the losses in rental revenue incurred by forced shutdowns for all contractual partners.

These outstanding lease payments could put an increasing amount of pressure on the retail real estate industry. As recently as Thursday, NordLB reduced its stock price target for the real estate investor Deutsche Euroshop, who is specialized in shopping centers, by half. The decline of rental revenue due to decreed shutdowns of shops affects the company directly, wrote the expert. The longer the shutdown phase continues, the bigger the increase of the vacancy rate could become. In terms of sales and earnings of Deutsche Euroshop, he forecasts substantial “skid marks” for this year.