Almost three-quarters of Irish retailers have actively sought a rent reduction from their landlords since the start of the year, it was revealed by industry body Retail Excellence Ireland (REI ), in a survey of 180 of its member firms, representing more than 2500 individual retail stores across the Republic of Ireland.
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 per cent of retailers who have sought a rent reduction from their landlords this year, 35 per cent of high street retailers, 13 per cent of shopping centre retailersand four per cent of retail park retailers have been successful.
— Rent reductions were flatly refused to 26 per cent of shopping centre retailers and 17 per cent 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 per cent of respondents indicated that they had negotiated a change in rental payments from quarterly to monthly.
— Of that figure, 50 per cent of high street and shopping centre landlords had no issue with the alteration.
— 40 per cent of retail park landlords have threatened their retailers with legal action if they alter their payments.
David Fitzsimons, Chief Executive of Retail Excellence Ireland, , 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. Ireland’s commercial landscape has changed dramatically and rents will need to immediately fall by between 20 and 50 per cent 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,” said Mr Fitzsimons.
“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 to 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 the recently introduced rateable calculation which will see rates for retail premises increase by as much as 60-80 per cent.
In a bid to assist its members with rent negotiations, and in a new departure for Irish retailing, REI is in the process of awarding a multi-million euro contract to one of three shortlisted real estate agents who will handle property agreements on behalf of more than 1,000 member-stores across the country in phase one. REI is due to announce the successful agent in early March.
Retail Excellence Ireland is the not-for-profit organisation representing more than 580 companies – 8,000 retail stores - more than one third of the total store numbers in the Republic of Ireland. REI’s members collectively employ approximately 100,000 people across all retail sectors ranging from pharmacy and fashion, to grocery and homeware.