Best Buy to face multi-million bill for empty UK shops
Sunday 13 November 2011
The US retailer Best Buy and joint venture partner Carphone Warehouse could be saddled with tens of millions of unanticipated costs from the 11 stores it plans to close across the UK.
Best Buy announced its plans to close the stores last week after making its UK debut just last year.
The lack of demand from retailers in the out-of-town retail sector could mean that Best Buy's rent and rates bill will be nearly double what it had expected to pay if it cannot extricate itself from the leases.
The rent and rates bill for the stores totals more than £14m a year and vacancy rates in the out-of-town sector stand at close to 10 per cent.
Richard Allsop, an agent at Morgan Williams, said: "The leasing market in this sector is tough. Many of the Best Buy units have restrictions against the sale of food, clothing, and mezzanine floors, this could reduce their appeal. The cost of having a store the size of a Best Buy empty would be around £1.25m a year in rent and rates."
In a statement, Best Buy said the write downs are "£40m-£45m" for the cost of the stores Best Buy said it estimated "that the group's share of the total net cash investment from inception to closure will be in the region of £100m." But this could rapidly increase if it has to pay expensive reverse premiums to pass on the leases.
The property agents DTZ and Curson Sowerby Partners are testing demand for the shops and are reporting back to Best Buy at the end of the month.
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