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McInnes' rent remarks earn ARA backing
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McInnes' rent remarks earn ARA backing
Russell Zimmerman, ARA executive director.
Posted Date: 22/09/2011
By Inside Retail


The Australian Retailers Association has supported Premier Retail CEO Mark McInnes’ comments that shopping centre rents are excessive and said smaller retailers who have even less bargaining power at the tenancy negotiation table. 

ARA executive director Russell Zimmerman said retailers are struggling with excessive tenancy costs as they contend with falling sales due to low consumer sentiment and they are often left defenseless at the negotiation table due to the imbalance of power between landlord and tenant.

“The Premier Retail has used the threat of closing stores as a tactic for negotiating a fairer lease. However, it would be unthinkable for a smaller retailer to use this same tool which leaves them with even less power to keep their rental costs manageable.

“Smaller retailers often have superannuation invested in their business and they risk losing their livelihood if they threaten to walk away from a retail tenancy. But if they stay and pay too much rent they may lose everything anyway. They really are caught in a catch-22 position.

“Rents are growing at a greater rate than retail turnover. Rent is typically based on CPI (Consumer Price Index) plus two per cent, however retail trade figures are consistently showing either negative growth, or growth well below the current CPI.

“The oligopolistic nature of shopping centre ownership often means, especially for smaller retailers, signing leases which are unsustainable and cannot be absorbed through sales as already price sensitive consumers stay away from the shopping centre.

“The Productivity Commission’s draft report acknowledged the need for review of zoning and property laws, giving retailers more flexibility in where they set up shop and therefore giving a bit more balance to the bargaining process.

“However, the ARA is still calling for reforms such as third party reporting of turnovers, first and last right of refusal, independent market rental valuation and national registration of leases to make for more transparency in the negotiation process and ensure retailers stay competitive and viable,” Zimmerman said.
Comments:

Saturday, September 24, 2011 by William
Retail Princess seems to have far too much time on her hands and seems she could be part of the problem... Customers like her want something for nothing and do not realise they are part of the problem - Hiring is one of the hardest things to do, we had an ad in for an experience sales staff - We received 350 applications only 10 had a cover letter and the qualifications as specified, the rest were of Indian and Chinese origin with no experience as specified, most not fluent in English (You can tell by the wording in their application) - Our business is not a charity for those the government make apply for a job no matter what it is - Go to Centrelink and look at all the people on computers who are made to look for a job by their case manager ... As much as you want to see everyone with a job - Hiring the wrong person can kill your business … There are not enough experience, qualified people looking for jobs – A huge problem that has not been addressed
Friday, September 23, 2011 by Retail Princess
Retail Watcher and Buzz Light year how refreshing to have some objective comments posted. Time for a shake up retailers, do what you have always done and you will get what you have always got. Martin Butler has a point in his comments - the key to retailing and to succeeding, is in the art of being chosen - what drives you to return to a store, when is the last time you were dazzled with service and a WOW experience. Is it any wonder that customer service in the US bedazzles...they are incentivised to sell and keep you coming back for more - retail therapy is an addiction, if you get a bad hit, there are no second chances, and no bad landlords to blame. Retailers need to stop being the victims, and work on strategies to become the victors - and that requires innovation and change!
Friday, September 23, 2011 by retailwatcher
"Buzz Lightyear" you are on my wavelenth my friend! I wrote my initial comment, and by the time I had posted it, yours had been published- and pratically the same thoughts.
Friday, September 23, 2011 by retailwatcher
The bubble definately needs to burst, and rents need to settle to a sustainable level- there is no question that high rents are compounding the problem. I feel that this is only one peice of the problem, and many retailers are using this and the current market as an excuse for POOR RETAILING. retailers need to be careful not to get swepped up in blame and take a good hard look at their business as well. There are many sucessess stories in retailing at the moment and many bricks and motar stores doing boombing business, it is not all doom and gloom- its time for innovative retail, exceptional custmer service and product and brand positioning to be at its best. In saying that- I definately agree that if a retailer is doing all the right things and still not bringing in the sales- then landlords need to work with tenants to adjust their rental if they are right for the centre, or offer temporary rent reduction, but why should a landlord lower rental that he could easily get from another good operator- if the current operator has given up and started blaming the world instead of adjusting their business model???
Friday, September 23, 2011 by Buzz_LightYear
I feel for the plight of retailers at the moment. Times are tough - no one is arguing that. However it really is time for local retailers to adopt 'best practices' and innovate their business model. What is clear in thesr challenging times is that the innovative succeed - and those who have up until now been riding the wave of high consumer spending but refuse to change, will fail.
There are some local retailers who are bemoaning the rise of internet shopping and the arrival of some global retail giants (Zara, Top Shop etc). These brands have entered our market because they see opportunities. Opportuniities created by the lack of innovation by the majority of retailers. This is obnviously not the case across the board - there are many local brands which are staying ahead of the pack by innovating and changing the way they do business to suit the climate.

"Retail Princess" hit the nail on the head - its time for retailers to take responsibility for declining sales and INNOVATE or PERISH.
Thursday, September 22, 2011 by Emm
Big problems why people feel they are not getting the service in retail is because operators are trying to make money and one overhead they can control is wages. In major shopping centres especially the biggest overhead for operators is RENT and it only goes up. The landlords are really to blame for the poor service as the operators have no choice if they want to survive. Dont confuse my comments with poorly trained staff, that is another issue altogether. The face of retail is changing and some of the power is coming back to tenants. Do your maths, figure out how much profit you need to make within reason, and tell the lanldord what you are prepared to pay, if they dont accept, you are better off without them, dont work to make the landlords rich. With so many vacancies, shop around, relocate your business, it will get to them soon.
Thursday, September 22, 2011 by Jenny
Real Estate Agents have an Agenda - To sell properties, hence why they don’t care about tenants - landlords can negative gear - So what is the Answer - No negative gearing after 6months especially if they are being unrealistic with their rent expectation - We have three large and three smaller retail shops empty on our street and two businesses up for sale; they all need renovating; the landlords don’t want to do any work on the properties the rents are ridiculously high
Newtown, Paddington but especially Leichhardt are all suffering …
Thursday, September 22, 2011 by Retail Princess
For goodness sakes people, wake up and take some responsibility for declining sales. I have always been passionate about supporting bricks and mortar retail - however am finding on line a more pleasant option than dealing with rude, ignorant sales people who have no product knowledge, no care factor and no interest in trying to convert a sale. We are in an age where no, thanks to a handful of unscrupulous greedy operators, retailers now have an upper hand - shopping centres NEED retailers, they are for the first time in years, taking on shopping centre owners and asking for location, fitout and rent free. I went shopping on the weekend, at a big box retailer, (who by coincidence is at the forefront of opposers to on line shopping) for a catalogue special (Catalogue released on the day I went shopping) - sales assistant (when I could find one) looked up the catalogue product on the computer and told me "they didnt have any red ones" - I asked him if he could look up whether any other stores did have a red one in stock, he replied; "no, sorry the stores are all seperately franchised". Disappointed I asked to see the black one. Sales assistant led me to a merchandising cabinet to view the black model, and low and behold, there were 4 red ones in the display cabinet. If I wasnt motivated enough to cut my losses and walk away, I had to wait five minutes while the sales assistant found the right key to open the cabinet and let me view my potential purchase. When I asked sales assistant on advice of how best to use the product, he told me "i needed special software" and that he had "no idea how many CD's you could fit on a 4GB MP3 player". Do I need to tell you how the story ended? I walked out, frustrated and irritated and purchased what I wanted on line, foregoing the need to have it here and now, for the time better invested researching my questions and purchase on google.
Thursday, September 22, 2011 by Peter Wilson
We all need to realize that Shopping centres KILL CBD's. Once lovely open shopping districts are now run down main streets. Shopping centre owners dictate who they want in their centres. And push out those they do not want. There is no use in having rent based on turnover as a percentage. When the percentage can be moved upwards. It is all a free and open market. If a shop owner can't afford the rent n a shopping centre then move out. They will evenetually realize that they have to drop their rates and conditions to atract tenants. Let the small retail take over the CBD's again. Bring back poeple into the malls and main streets of our community. YOU might find then that the big end of town want to come back to the man street as well.

Thursday, September 22, 2011 by HIS
Hey Bye bye small retailer. Chain and brand tenants have also fallen victim over the past 12 months - Angus and Robertson, Colorado, Ed Harry etc. Many of the chain and brand tenants don't want 2nd and 3rd category Centre shops anyway. I am in a centre which had Sanity, Ed Harry, Angus and Robertson, Reject Shop, and Venture to name just a few which have closed over the years. The way things are going there won't be enough stores to fill vacant shops in any of the Centres. I have customers telling me all the time that the bigger Centres all have the same Stores and look the same and that it is nice to visit shops which are a bit different, and more Community orientated. Many Customers like to be recognised by a shop proprietor and this sure doesn't happen in the bigger Centres. I don't think Landlords will be able to pick and choose in the future.
Thursday, September 22, 2011 by Ken
There are 5 or 6 empty shops vacant in the socalled best shopping centre in Toowoomba at the moment and now one of the big discount chemist chains are closing there doors soon. It's about time centre management got there act together. I also know that shop cash registers are linked to centre management computers and if the shops gross income for the month exceeds a certain dollar value the centre takes a percentage of that as well. If a business has a good month they are penalised for it. That realy sucks.
Thursday, September 22, 2011 by bye bye small retailers
Thank you Mark Mcinness..i manages a business in the inner west of Sydney
empty stores.. GREEDY LANDLORDS....Ruthless Real Estate Agents who in Newtown are destroying this once interesting strip..
There is collusion and these particular agents do not care about the suburb or the tenants and our dismayed locals..We are being quoted absurd increases< stores close and empty shopfronts...We are told the Landlords want chain and brand tenants...as they are rent guarantee..
Come on Minister for Small Business get of your Chair do something..
Thursday, September 22, 2011 by HIS
At long last someone is prepared to say it how it really is.
The sooner rents are based on a percemtage of sales (based according to the type of business) the sooner we will be able to compete with the on line sales which are obviously growing daily.
Keep up the pressure Mark McInness - not only for the big guys but also for the stressed small Retailers.
It was obvious by the comments by Premier 6 weeks ago that their intent was in fact to put pressure on greedy landlords with the threat to close several of their stores.
I only wish I had the same bargaining power with my small retail outlets which have been drained of cash flow due to a slump in sales but Landlords who are not prepared to negotiate reductions in rent in what is proving to be my worst retail sales in at least 20 years.

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