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Reserved Store. Credit: LPP

LPP’s withdrawals from contracts with shopping centres as a step towards new agreements

The Management Board of LPP decided to withdraw from some of the contracts concerning the lease of space in shopping centres in Poland. The contracts concern approximately 29.5% of the total retail space used by LPP Group. The decision is driven by the concern for the company’s interest in the face of the effects of the COVID-19 pandemic on trade.

At the same time, the company expresses its willingness to enter into talks with the shopping centres about new agreements that would include conditions adjusted to the new circumstances.

The new retail reality after the opening of the shopping centres will differ from what we knew before the announcement of the pandemic. Shopping in gloves, masks and face shields and many other safety restrictions will significantly affect the comfort and psychology of shopping, thus discouraging customers. Concerns related to mingling in large groups of people, compounded by limited access to shopping centres for many months, will not allow the centres to meet the goals and services for which they were built. As the Gdańsk company forecasts, revenues in brick and mortar stores will probably not exceed even 30% of last year’s levels in comparable periods.

“Rents at the current level are not justified in any way, taking into account the limited range of services which, due to trade restrictions, shopping centres can currently provide to the users of premises and their customers. Failure to adjust the amounts of rents to the current situation of the shopping centres would be tantamount to closing the stores and thus laying off employees, which is something we are trying to avoid at all costs. For several weeks now, we have been speaking out about the tragic situation of the whole trade and service sector. If we want to keep jobs, we need to adapt the conditions of carrying out commercial activity, including in particular lease costs, to the new reality as soon as possible. Every day of delay in this matter increases the risk of a gigantic wave of lay-offs. That is why we have to make decisions here and now, based on the methods available and on our existing knowledge about the long-term effects of the epidemic“, comments Sławomir Łoboda, Vice President of the Management Board in LPP.

According to the stance of the Management Board of LPP, the contracts hitherto in force are inadequate given the new circumstances in which shopping centres and users of space in these centres will operate.

“We are witnessing unprecedented and permanent changes in economic and social relations, which require all parties to adapt to the new reality accordingly. If the owners of the shopping centres fail to verify the method of settling the lease costs, we will have to close the stores. However, we still believe that based on a constructive dialogue with the shopping centres, we will be able to work out solutions that are fair to both parties.” – adds Sławomir Łoboda.