The plan, which will go before a meeting of Sheffield Council’s cabinet committee next week, involves the authority buying out John Lewis’ long-term ‘nominal’ lease on its building in Barker’s Pool, entering into a new 20-year agreement for the site with a rent based on turnover, and giving the retailer money towards the cost of revamping the shop.
The strategy, a report says, would ‘safeguard a significant number of jobs’ at the former Cole Brothers store.
It represents one of the next phases of the council-led £469 million Heart of the City II redevelopment project, which is being built around John Lewis’ premises.
A spokeswoman for the employee-owned retailer, which has been gradually reopening its stores as lockdown restrictions have been eased, confirmed that the company was ‘finalising a lease agreement’ with the council that would support the shop’s ‘phased refurbishment’.
“John Lewis & Partners occupies a prominent site in Barker’s Pool located at the centre of the Heart of the City II masterplan,” the report to next week’s meeting says.
“The existing shop is held on a long lease from the council and is in need of refurbishment/investment to bring it up to modern retail standards. The council are fully engaged in discussions with John Lewis and the basis of a deal will enable the retention of this high quality retailer in the city centre within their current building.
“The basis of this deal is that the council will pay a fair price/premium for the proposed surrender of their existing lease, which has a term of 42 years remaining at a nominal ground rent. It is proposed that the council will then grant a new 20-year modern lease for the building based on current market terms with a rent based on turnover.”
The surrender of the old lease, and the granting of a new one, will include a ‘capital contribution from the council towards the refurbishment costs of the building’, with final terms to be agreed, the report says.
“Monies will only be released to John Lewis as works to the building are undertaken and completed.”
A separate document detailing the financial terms of the deal has not been made public as it deemed to be commercially sensitive.
“The council is acting as a commercial landlord would do, and the final terms of the proposed surrender and renewal deal will, once agreed, be signed off by expert advisors/consultants, acting for the council,” the report says.
“Securing a more viable John Lewis shop in the city centre will safeguard a significant number of jobs within the shop and wider supply chain, and also ensure the continued receipt of business rates. It will also help to maintain both the public’s and commercial retailer/investor confidence in retail in the city centre which will assist in letting the surrounding properties in the Heart of the City II development and wider city centre.”
The report admits the deal carries ‘a degree of risk’ linked to ‘the longer-term viability and continued levels of turnover of the shop in a still-evolving retail market’.
John Lewis’ chairman, Dame Sharon White, told workers in a memo last week that not all outlets would reopen after lockdown, there would likely be ‘implications for some partners’ jobs’ and that it was ‘hard to see the circumstances’ where the firm – famous for its claim to be ‘never knowingly undersold’ – could pay its staff bonus next year. The partnership, which also owns Waitrose, had already entered the Covid-19 crisis with 'weakening profits', she said.
The retailer would have moved to a brand new department store at Wellington Street, on the site of Sheffield's old central fire station, under the Sevenstone scheme that stalled in the last recession. The company decided in 2012 that it was staying put after years of delay.
The Barker’s Pool store opened in 1963. It traded until 2002 as Cole Brothers, which originally started on Fargate in 1847.
The John Lewis spokeswoman said: “We welcome the scheme to develop the heart of the city centre in order to make Sheffield a more vibrant and successful place. We are currently finalising a lease agreement with the council to determine how their plans will support the phased refurbishment of our shop.”