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Retailers Call For Flexible Rent Structure That Can Go Up Or Down

At The Australian Financial Review Virtual Retail Summit that was held yesterday, multiple sector stakeholders put their support behind a more flexible rental structure that would enable retailers to pay less rent during times of financial hardship.

Paul Zahra, CEO of the Australian Retailers Association, said at the summit: “The overwhelming majority [of retailers] want a variable rent structure, where landlords and retailers share on the upside and they also suffer on the downside, to deal with particularly unprecedented times as we’re seeing right now with this pandemic.”

CEO of Kmart Group Ian Bailey echoed this sentiment, stating: “I think inevitably we will be looking for mechanisms where rental payments can go up and down.”

On the other side of the fence, there is also the argument that variable rents are problematic for commercial property owners, as the costs associated with operating a shopping centre remain static.

Furthermore, in recent months numerous stakeholders have stated that shopping malls and shops themselves will need to create a superior offering to entice shoppers back to malls, which would add costs for both parties.

As it stands, the ACCC has allowed retailers to collectively bargain with landlords during the COVID-19 crisis, and the federal government has introduced a mandatory code of conduct on commercial leasing principles.

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