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It is time for a Royal Commission into retail shopping centre development and retail tenancies in Australia

Mark Fletcher
May 8th, 2018 · 6 Comments

We, Australians, small business retailers, suppliers to small business retailers, local towns, all of us need a Royal commission into retail shopping centre development in Australia and the behaviour of shopping centre landlords.

There is enough evidence to indicate that an appropriately skilled and resourced Royal Commission could uncover behaviour that is illegal and harmful to our economy and small businesses and families that rely on the small businesses.

I appreciate that the areas I think the suggested Royal Commission cover are broad and could be better served as two investigations. However, the two issues feed into each other. I think they are best considered together.

WHAT IS A SHOPPING CENTRE?

For the purposes of my proposal, I suggest that a shopping centre is a retail development with fifteen or more shops of any size.

While I am sure there is misbehaviour to consider in smaller centres, for management and focus, a threshold of fifteen tenancies, or similar, is needed. Otherwise, any Royal Commission would run too long and cost too much.

RETAIL SHOPPING CENTRE DEVELOPMENT.

This is the beginning of the issue. Whereas in the US and other countries growth in retail tenancy space is flat or declining, in Australia it continues to grow. Some say we already have far more shops that the population can support.

In regional and rural locations the challenge is that a new centre is usually located outside town and its development can gut the centre of town, diluting or killing off the heart of a small town.

In some cases, mid-size centre development tis driven by competition by the two major supermarkets and aided and abetted by several other anchor tenants and supported by Tatts keen to be in all new centres.

  1. Do we need more shopping centre space?
  2. Should there be controls on approving this?
  3. What is the economic impact of the current growth in retail space in Australia?
  4. What is the social impact of the current growth in retail space in Australia?
  5. What is the impact, specifically on small business retailers of the growth in retail space?

LANDLORD BEHAVIOUR.

Talk to any small business tenant in a shopping centre and they will have at least one landlord story that causes them stress.

There is the landlord who did a handshake deal with a party that was negotiating to buy a business. the landlord squeezed and the family business closed. The new tenant moved in without paying goodwill.

There is the landlord that took too long on centre re-develoopmnent, making decisions that saw a 50% drop in shopper traffic, and refused any compensation for retailers.

There is the landlord that permits one sore to be on a % deal where they pay 9% of turnovers in rent with a shop next door not able to have such a deal and managing and occupancy cost of 32%.

There is the landlord that strong-arms retailers verbally, never in writing, never in a way that can be used against them.

There is the landlord that takes a marketing levy every month and spends this on activities that offer no benefit whatsoever to retailers.

There are hundreds of stories.

The Royal Commission needs to listen to stories, all stories. Tenants need to be able to do this confidentially as the fear of reprisal by landlords is real.

  1. Do landlords act unlawfully?
  2. Do landlords treat retailers differently?
  3. Do landlords act in secret knowingly harming small business retailers?
  4. Do landlords abuse funds they collect from retailers for marketing?
  5. Are landlords fulfilling their obligations in terms of bringing traffic to shops in their centres?
  6. How are the various roles of employees paid in landlord businesses? What are their incentives?

There are many other questions to answer. My goal here is to kick off the discussion.

WHY?

Too many families are losing their businesses, homes and other assets. Too many small business operators are having their personal situations, including health, negatively impacted. Too many small business operators are losing their life. Yes, this issue is that serious.

Small business retailers feel helpless. They want their business. It has been their life’s work. They fear without it they will have nothing. This can see them agree to a lease that is at its very foundation doomed inappropriate for their business.

Landlords have the upper hand. They are in control. Too many people in landlord businesses are bullies and aware of how to bully without being caught.

The best way to resolve this is to shine a light. Only a Royal Commission c an have the authority and power to do this.

I get that Royal Commissions are popular right now. This suggestion, however, is important given that those most impacted are also those most vulnerable – small businesses, run by families. Were are told small business is the business backbone of our country. However, there is evidence to suggest that small business retailers are disadvantaged in terms of shopping centre development and retail teensy negotiation.

57 likes

Category: Newsagency challenges · Newsagency management · newsagency of the future

6 responses so far ↓

  • 1 Brett // May 8, 2018 at 10:33 AM

    Our shopping centre was ‘redeveloped’ by a new owner, 1/2 the centre was demolished with 1/2 the shops having to leave, including the bank. 2 years later there was still half a shopping centre, numbers massively down and the new owner closed his $20 shelf company and went to the wall. Lawyers tell us there is no one at fault and no one to blame.

    4 likes

  • 2 er // May 8, 2018 at 1:55 PM

    ticking bomb

    2 likes

  • 3 Graeme Day // May 10, 2018 at 8:28 AM

    Good article Iam surprised at the lack of comment with a topic so important to retailers..

    Unconscionable Conduct, I believe is the biggest problem followed by monoplolistic which could borfder on predatory power even though the party they act for is not themselves indirectly they benefit from their decisons.

    1 likes

  • 4 Jonathan Wilson // May 14, 2018 at 9:20 AM

    I cant find the article now but I remember seeing something a few years ago where a fish & chip shop in a small centre was told they couldn’t sell a particular item of food (something fish & chip shops will often sell IIRC) because another retailer in the centre complained about it.

    Or more recently, the situation in QLD where a landlord banned a barber shop from cutting woman’s hair to protect a hair salon in the same centre?

    Is it fair for landlords to dictate to tenants what they can and can’t sell?

    1 likes

  • 5 Jim // May 16, 2018 at 5:23 AM

    Tabcorp (representing Tatts lottery brands) have made a submission to the Parliamentary inquiry into franchising.

    https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/Franchising/Submissions

    Interesting read. Raises a lot of questions.

    0 likes

  • 6 Kim // Jun 20, 2018 at 2:24 PM

    I have been in franchising located in shopping centre for the past 20 years. By far it has been the shopping centre which has dictated unreasonable rents that has affected any success that may be possible from trading. They are aware that as businesses we have loans to repay and therefore dictate the rent. There is no choice to not renew if a loan is to be repaid. Entering a shopping centre lease is like being in jail. Once committed they decide to open like businesses close by without any consideration of downturn in trade for the existing tenant. Their behaviour is unscrupulous and there are many, many examples of families being affected by their unconscionable conduct.

    5 likes

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