70% of retailers seeking rent reductions
More than 70% of Irish retailers have actively sought a rent reduction from their landlords this year, it was revealed today.
In a survey of 180 of its member firms, representing more than 2,500 individual retail stores across the Republic of Ireland, by Retail Excellence Ireland (REI).
Of the three retail formats surveyed, high street, retail park and shopping centre, high street landlords were the most likely to agree a rent reduction and altered payment terms compared with retail park landlords, who were the least flexible.
The survey respondents included some of Ireland’s biggest retail brands across all sectors.
It was found that of the 70% of retailers who have sought a rent reduction from their landlords this year, 35% of high street retailers, 13% of shopping centre retailers and 4% of retail park retailers have been successful.
Rent reductions were flatly refused to 26% of shopping centre retailers and 17% of high street retailers.
For the majority of retailers, discussions are still ongoing.
REI members were also asked about changes to their payments terms.
More than 50% of respondents indicated that they had negotiated a change in rental payments from quarterly to monthly.
Of that figure, 50% of high street and shopping centre landlords had no issue with the alteration.
Some 40% of retail park landlords have threatened their retailers with legal action if they alter their payments.
Speaking today following the launch of its survey, REI chief executive David Fitzsimons said the results revealed that while some landlords have acknowledged that rental terms need to be renegotiated to reflect the changed market conditions, the majority of landlords, particularly retail parks, need to be more flexible.
“Along with labour and supplier costs, rent is a major factor impacting on retailers’ ability to stay in business,” said Fitzsimons.
“Ireland’s commercial landscape has changed dramatically and rents will need to immediately fall by between 20-50% to reflect this new reality. Some landlords have been fair in coming to new arrangements with retailers but others, particularly in retail parks and shopping centres, will not even engage in dialogue.”
“At the moment many of our retailers are locked into upwards-only rent agreements whereby their rent can only increase even though market conditions are deteriorating, not improving. Compounding this situation is the fact that most retailers are required to pay their rent in advance on a quarterly basis.
“Agreeing new rental terms is in everybody’s best interest. Stores are closing down left, right and centre and there are no new retailers replacing them. By agreeing more realistic rents and more flexible rental payment terms, there is a much greater chance that retail businesses will survive,” said Fitzsimons.
Earlier this month, REI met with Minister Dermot Ahern, and urged him to abolish upward-only rent agreements develop a code of practice for lease laws and establish a register of rent information to assist in the rent review process.
An REI delegation has also met with Minister John Gormley calling for the postponement of a the recently introduced rateable calculation which, according to REI, will see rates for retail premises increase by as much as 60-80%.
