Retail sector wants action on rents

RETAILERS claim rents have fallen just 4% in the last two years while sales have plunged 30%.

In what has been described as the most “in-depth research of rent reduction activity ever” retailers said that commercial landlords have not reduced retail rents “to even close” to market rates. They said government action to abolish upward-only rent is “urgently required”.

The Retail Excellence Ireland (REI) survey of 1,418 retailers found that between 2009 and 2011 rents were cut by an average of only 3.83% and over the same period more than 50,000 retail jobs were lost, with employment in the sector falling to 255,000.

In 2009 an average rent reduction of 3.1% of all lease rents was granted by landlords, this increased to 4.4% in 2010, and increased marginally to 4.4% in 2011.

REI said that over the three-year period total rent of €680m was paid by the 1,418 stores, or €159,000 a year on average.

Gross rent reductions granted over the period amounted to €27m or an average of €6,300 a year.

Retail Excellence Ireland chief executive, David Fitzsimons, said the survey is “clear proof” that the vast majority of commercial landlords have no intention of adjusting rents and are holding onto Celtic Tiger lease agreements.

“Every other cost faced by retailers has decreased over the past three years, with the exception of rents. What is most concerning is the fact that new market entrants can command rent at rates 50% lower than legacy tenants, thus many long-established professional retailers are being forced out of business.”

Mr Fitzsimons said the vested interests opposing the abolition of upward-only rent reviews consistently refer to anecdotal evidence that landlords are engaging with retailers on rent. He said this research clearly illustrates the vast majority of landlords have proven that they are unwilling to reduce commercial rents to rates reflecting the market reality.

“Indeed, the pension funds have claimed that they are legally prohibited from reducing commercial rents. All landlords will at some time have to bear the market realities, whether through strong government legislation to deal with the matter or retail tenant failure.”

From 2000 to 2007 rent increased 240% while consumer prices rose 30%, according to REI.