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Unfair shopping centre rental

Following my involvement with the Productivity Commission Inquiry into retail tenancies last week I have been approached by several people with data across a range of businesses in capital city shopping centres.  If the data I have been shown is accurate, small business is treated appallingly.  No surprise there I guess – landlords have efficiencies in dealing with a national tenant compared to a small business with one lease in one centre.  However, does that justify a rent difference of six and ten times the per square metre rate?

Even comparing like size and location within the centre for like, the difference is more than six times the rent for the independent retailer.  Six times!  And that is in comparison with a chain with not even 100 stores.

For newsagents, 1,450 of whom are customers of my software company, this rent penalty by shopping centre landlords is debilitating.  Newsagents control the price of less than half of what they sell.  This denies them the flexibility of other retailers.  The margin on their fixed price product is slim, 25% or less.  This makes them economically vulnerable to the annual rent rises of 5% and more.  So, for newsagents, the Productivity Commission Inquiry is timely and important.

I have encouraged those privately sharing this data with me to make a submission.  I hope they do.  The more we focus on the disparity in rent and other commercial terms for small businesses compared to national tenants the better.

In our work here we are privileged to have access to a relationship beyond IT.  This insight helps us better serve our customers and the community more widely.  We are resolutely committed to helping small business retailers be strong.

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2 Comments

  1. Hello Mark,

    I fully agree with your comments. Small business is being screwed over by the landlords and the initial findings of the PCI are disappointing.

    Despite means of recourse as defined in the various Retail Tenancy acts the advantage still lies with the Landlord in that even in a lose/lose scenario, viz. an empty shop, the landlord still wins as he can carry the loss better and it shows the sitting tenants that negotiation will not be entered into.

    While it is no guarantee, I would advise all small business to employ a professional retail leasing expert when negotiating a new lease or lease renewal. Afterall, the landlord negotiates leases several times a year while the small businessman does it once in five years. Their initial fee may seem high but if they do a proper job they will easily save ten or more times their fee over the course of the lease. I would also point out that your suburban solicitor is not a retail leasing expert.

    As an aside, I am presently in court with my landlord over this rental issue. I will not comment on the specifics of the case in this forum but will say that if small business is prepared to stand up for themselves, the manner in which they get treated may change in time.

    Regards,

    Bob Hunter
    West Gosford Newsagency.

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  2. I’ve found the same thing happening to me, when i approched the land lord he told me if i didnt like i could move out! A big retail store has 15 times the space i have and thier rent per sqm is 35% cheaper than mine. I only found out by accident what the other store was paying per sqm . I know that they have a bigger space but all the same, i feel like he is ripping me off big time.

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