If you don’t ask, you don’t get!
By Peter Scott | Recession Strategies | Tuesday 30th June 2009
I’ve been working with a few clients in the retail sector in main centres of both North and South Islands in the past few weeks and it’s given me a new feel for the trends and issues retailers are facing.
There is no doubt, regardless of people’s financial situation, that kiwis are spending less. This is causing real challenges for most in the retail sector, large and small operators alike.
And in these times, it will take both landlords and tenants alike to keep our shopping centres alive in the coming months.
It is important to all in the retail sector to consider the big picture. Vacant shops, whether in malls, arcades or on the main street, stick out like a sore thumb. And people are inclined to make quick assumptions that an area is dying if there are too many TO LEASE signs up. The area quickly becomes lifeless, which this is bad news for landlords, retailers and other businesses in the area.
One retailer I dealt with was finding times particularly tough, and their landlord wanted to put up their rent. Can you believe it?
They kept negotiating to the point that the lease expired. The retailer thought it was all over and that they would be out on their ear. But my advice was to keep negotiating, as it was most likely in the landlord’s best interests to keep the retailer on, potentially without the rent rise, rather than run the risk of not finding anyone else to fill the space.
It’s clear that in this market many landlords are prepared to negotiate a deal, and even potentially subsidise a tenant’s rent to keep places occupied.
However, there can often be fish hooks, so it is important to get good advice if you are in the position of negotiating a reduced or delayed rental.
The consequences of landlords and retailers being unable to work together to stay afloat could be disastrous. The lively shopping malls, arcades and main streets we take for granted as the centres of our communities could take on quite a different flavour.
So we’re all in this together, and it is best we reinvent the old paradigms of landlord-tenant relationships and be bold in seeking out solutions. As the old adage goes: If you don’t ask, you don’t get!
However, there is no accounting for stubbornness. Sometimes you can ask and still not get.
The big Line Seven receivership news that came out last night and this morning is instructive. Owner Ross Munro accepts that he read the value of the New Zealand dollar and the economy wrong.
But what really cheesed him off was the mall managers (read Westfield, AMP, Kiwi Income Property Trust) who wouldn’t cut him any slack. He had wanted to exit some of Line Seven’s leases but landlords played hardball.
Receiver Grant Graham, of KordaMentha, said the business might be sold as a going concern but “Whether it would continue with the retail footprint, I’m not so sure.”
By playing hardball over a few of Line Seven’s leases, landlords have now lost them all. As a result, landlords will have more vacant space to fill at a time when few want it.
It would have been so much better if landlords had worked with Line Seven to keep those retail spaces occupied. I hope some of those landlords read this column.
Upon reflection, maybe I’ll invite them to read it. After all, if you don’t ask, you don’t get!
Tags: landlord negotiations, lease negotiating, property lease negotiating, Property Lease Negotiation, recession property strategies, retail property leasing, tenant & landlord negotiations
