Retailers say spiralling rents put 50,000 jobs at risk

MORE than 50,000 retail jobs will be lost over the next 12 months unless the Government takes action to address the problem of upward-only rent reviews for existing lease holders, shop owners warned yesterday.

The Grafton Street Tenants Association complained that recent Government legislation to ban upward-only rent reviews for all newleases, while welcome, had created a two-tier property market.

The traders told the Oireachtas Committee on Enterprise, Trade and Employment, that landlords, mostly institutional investors, were refusing to lower rents even though they had known for many years that such rates were unsustainable. John Corcoran, owner of Korky’s shoe shop on Grafton Street, said his annual rent had risen from €140,000 in 1995 to €445,000 in 2005, a 318% increase compared to an inflation rate over the same period of just 35%.

Mr Corcoran said many well-known retailers – including Habitat, O’Brien’s Sandwiches, 3G and Hughes & Hughes – had experienced trading difficulties because of excessive rents and inflexible landlords.

He claimed upward-only rent reviews were almost unknown outside Ireland and Britain.

The warning from the Grafton Street traders came as retail industry group, Retail Excellence Ireland, named 15 major institutional landlords who have so far refused to lower rents for existing tenants. REI chief executive David Fitzsimons said it was incredible that some landlords were still seeking rent increases in the current economic climate, with demands for rent hikes in excess of 100% being sought by the owners of shopping centres in Dundrum and Swords.

“There’s an oversupply of property with an under-demand of tenants, yet rents are going up,” he said.

However, the Irish Association of Investment Managers defended the position of institutional landlords, claiming they were acting on behalf of pension funds run on behalf of ordinary people.

IAIM chief executive Frank O’Dwyer said his members were concerned about perceptions that there was persistent legislative intervention in the market. He also warned institutional landlords would look to invest in property in other countries if there were any moves to introduce index-linked rent reviews in Ireland.

Mr O’Dwyer said it was untrue that landlords were not engaging with tenants about rent reviews, as a recent survey had shown that 118 out of 258 retailers who had sought rent concessions had been granted them by IAIM members.

However, Labour TD Ciarán Lynch described Mr O’Dwyer’s claims that tenants set rental levels as “outrageous.” Mr Lynch said it appeared that landlords were already circumventing the new ban on upward-only rent review for new leases by insisting that only landlords could trigger rent review clauses in future.

sv A working group established by Justice Minister, Dermot Ahern to examine commercial rent reviews in existing leases is due to report by the end of June.