Commercial landlords and shopping centre owners have seemingly been oblivious to the fact that we had a Global Financial Crisis and have continued to demand high rentals while the economy headed very much in the opposite direction.
The plight of struggling small businesses, especially those in popular shopping precincts, was clear as "For Lease" signs started popping up on shopfronts across Queensland.
However, some leasing business owners are starting to take a stand and rent negotiation is becoming more common and more successful!
Mark McInnes, CEO of the Premier Retail Group owning such major retail chains as Just Jeans, Jay Jay's, Dotti, Portmans, Peter Alexander, Jacquie-e and Smiggle, took a firm stand against ridiculous rental prices at the company's recent AGM. This stance proved successful with their Portmans store in Canberra, where they achieved a rent reduction of 30% after threatening to simply shut the store and go online.
Promisingly, it is not just the retail giants with these powers of persuasion. Other success stories include Broadbeach restaurants Sage and 1Two3 who negotiated a respective 45% and 32% reduction in rent.
Closer to home, Fortitude Valley was hit hard by the economic crisis and the reign of relentless landlords and is only now starting to experience some relief. Lydia Zimnoch Woolcott, owner of the fashion boutique Drobe in the popular Ann St stretch, has negotiated a small reduction in her rent but comments:
"As much as there has been a little help and rent reductions here in Fortitude Valley, it is still far less than the 30% reductions seen in other areas. There is still a long way to go to assist business owners in this area to be able to survive through this difficult economic time where retail sales are significantly lower than they need to be to stay afloat."
George Hadgelias, Principal of Ray White Paddington, comments further on commercial leasing in Brisbane:
"What we're finding is in good quality, high profile, high street locations that the rents being paid are at least the equivalent of, or in excess of, rents achieved pre the GFC. What we have found is to maintain the rents and obviously protect their investment, lessors are prepared to offer bigger incentives by way of contributions toward fit out and extended rent free or half rent periods."
The key message here for renters is to negotiate â€" ensure that your rental commitment is both commercial and realistic for your business. Next to the payroll, rental is often the largest overhead for a business and requires management and control.