NATIONAL: An executive from Westfield has poured cold water on the suggestion individual tenants may team together to strengthen their negotiation position with shopping centre landlords. The comments follow a retailer backlash after a government inquiry set up to investigate the retail tenancy market failed to address what tenants claim is the imbalance of bargaining power between specialist tenants and larger landlords.
Several clothing and footwear retailers spoken to by Ragtrader have joined calls for individual businesses to join together to negotiate their leases as one entity. The idea of collective bargaining has already received the endorsement of the Australian Competition and Consumer Commission.
However, in an interview with Fairfax newspapers published yesterday (September 19) , Westfield retailer relations general manager Jack Hanrahan said so far tenants had been reluctant to try the approach.
Hanrahan said this attitude was unlikely to change soon.
"My gut reaction is, I just can't see it," he told The Age newspaper.
Whistles chain owner Anne-Marie Gaganis said the biggest hurdle facing the retail tenancy market was landlords' quest for annual growth in rent in excess of CPI.
"For example, typical rent review clauses require rents to increase each year by CPI plus two per cent or for the Whistles shop five per cent. If the retail market is generally flat then this means that more and more of the net profit is diverted to pay rent."
The other problem was the inability to obtain rights of renewal for leases in shopping centres, she said.
"A five-year lease term is insufficient time to pay back a $150,000 loan for a shop fit and have a profitable business, 10 years is a more reasonable period, ie a five-year lease with a five-year renewal option."
For more on this issue see the next edition of Ragtrader, on sale from tomorrow (September 19).