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Retailers, landlords fight out rent deals
Retailers, landlords fight out rent deals

Retailers and landlords are facing fierce rent negotiations as one of Australia's biggest shopping centre operators, Stockland, drops the price on some leases.

Executive director of the Australian Retailers Association Russell Zimmerman claimed many retailers were pushing for reductions amid falling profits, and some had negotiated 15 per cent cuts.

"We had a meeting of retailers on Thursday and the message that came in was that deals are being done," Mr Zimmerman said. "I've heard of a few in WA getting a 15 to 20 per cent reduction, and that is happening across the country."

Sussan Clothing chain store recently managed to negotiate a discount on its Hay Street Mall premises in the city, with rumours pegging the reduction as high as 40 per cent.

The property's owner Theo Fermanis confirmed a reduction but said it was "nowhere near 40 per cent."

Mr Fermanis conceded pedestrian traffic in the store's immediate area was down, following a shift in activity to the city's west end.

The reduction in shoppers comes amid cautious consumer sentiment and intense competition from online retailers.

A recent report by National Australia Bank showed a 4.1 per cent increases in spending at shops in the year to April, compared to 15.5 per cent jump in the value of online purchases in the same period.

The consumer discretionary sub-index of Australia's S&P-ASX 200 index has slumped 59 per cent since its peak in May 2007. The property gauge has dropped 67 per cent from its high in February 2007.

Separate research by CBRE late last year showed Perth was in the top 20 most expensive cities in which to rent a shop, with the CBD store average at $US4026/sqm.

Stockland, Australia's biggest diversified property trust, cut rental costs by an average 21 per cent in the six months to December 31 for the 10 stores that replaced tenants who went into administration.

An additional 81 expiring leases resulted in rent cuts of 2.8 per cent for their replacements.

But not everyone got a rent cut, with the 102 stores renewing their leases with Stockland charged an average 6.1 per cent more.

Leasing spreads at Westfield were down 1.5 per cent in the first quarter, which was the first decline in at least five years.

Myer department store, a major Westfield customer, signalled in April that it would bargain hard for rent reductions.

"If the store is marginal, we will walk away unless we can get 30 per cent to 50 per cent rent reduction," Myer chief executive Bernie Brookes said recently.

"The power base has moved from the landlords."

Mr Brookes said Myer would end the year with a smaller network for the first time in at least seven years, and would close outlets in the bottom 25 per cent of performance if leases come up for renewal and landlords did not meet rent demands. <div class="endnote">

with Bloomberg </div>