High rents under pressure

High rents are once again becoming a hot-button issue for retailers, particularly in capital cities, Macquarie Wealth Management has reported in its most recent survey, which included information from 2300 stores.

The financial adviser says almost one-quarter of retailers surveyed said they were planning to reduce their floor space over the next 12 months in a bid to keep the cost of rent down.

“We asked each retailer to list the key factors currently contributing the greatest pressure on margins. Among all respondents, reduced sales volumes were cited in around 33 per cent of responses causing the greatest pressure on margins, compared to rent at 26 per cent and wages at 22 per cent,” the Macquarie report said.

In the 2017 survey, in contrast, rent factored as a leading concern with just 11 per cent of retailers.

The survey found that 8 per cent of retailers were looking to close down loss-making stores, up from no respondents in the last survey, which has led landlords to begin to entertain the unthinkable – lowering rents – particularly when it’s high-profile shops that decide to move on, the Australian newspaper reports.

In November, retail billionaire Solomon Lew, whose Premier Investments has hundreds of stores under brands such as Just Jeans, Portmans and Peter Alexander, said his company would close down its Dotti, Smiggle and Just Jeans stores in Melbourne’s Chapel Street, adding to the more than 40 empty shops along the prime shopping destination.

Lew said at the time of announcing the closures, “If landlords don’t understand that they need to reduce the rent in the competitive landscape, well then, we will just vacate stores.’’

In March last year Lew’s top fashion retail CEO, Mark McInnes, flagged that Premier Investments would escalate closures if it did not get fair rent deals.

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