Taylor Square Newsagency closed a year ago. The shop remains vacant today. I wonder if the landlord now wishes they had taken a different approach to rent negotiation for an empty shop is an expensive investment to carry.
When I drove past earlier this week I was keen to see what retail was now in the place. Under the Newsagency shingle is an empty shop.
Landlords need to understand the occupancy cost benchmark for newsagents and similar businesses: 11% of turnover where turnover only includes agency commission and not total sales.
Unfortunately landlords are manipulated by Real Estate Agents , in my area I have seen several businesses close due to continual rent increases whereby the landlord would not budge. After the premises were empty for some time they were leased for less than what the previous tenant was paying. I was told by one of the shop owners that at a owners meeting the Managing Agent was telling them to increase the rent every year because the more rent they getting the more their premises are worth. The agent looses nothing but does get paid for re-leasing the premises and a rent increase also yields him more commission.
Curious on why you think 11% is the occupancy cost benchmark for newsagents and similar retailers?
Amanda it is the number in my goal benchmark KPIs for a successful business. Occupancy cost is usually much higher and a key factor in unprofitability of those businesses. Newsagents take on leases that commit them to being loss-making unless they even more radically change their business than they should change.
Mark in your original post a year ago there is no mention of an inability to negotiate a better lease being the reason for Taylor Square closing. In fact if you read it you squarely lay the blame at the owners feet for remaining old school and not evolving their business. Seems like you just saw a empty shop and decided to blame the landlord.
I’d suggest if the business was unwilling to change there was probably nothing the landlord could of done short of destroying their capital with a under the odds lease.
That’s the problem though Steve. an untenanted property isn’t worth what one that would be tennanted at a lesser rate is worth PLUS there is all of the other expenses (leasing agent, drawing up new lease etc) that the landlord would also have to take into account.
When I renegotiated my lease 18 months ago my landlord bent over backwards to help keep me here instead of moving. Saved me $25K a year in lease costs and kept him a tennant plus kept his other tennants happy to still have me co located.
Steve I see two separate topics here.
The business could have thrived if it was relevant to those in its catchment area and relevant to associated fixed operating costs.
The landlord may have a price issue if the space has been vacant for a year.
Maybe no one wants to move in there? Price could be totally irrelevant.
The street is full of junk shops and bars, short of a full area revival that’s not going to change is it?
I see newsagencies thriving in streets that are empty or full of dump shops. It comes back to whether you are a retailer or an agent.
Im not sure I ve seen as many boarded up or vacant shops in shopping centres as Ive seen in the last three or four months including in what are considered top tier centres.
The second tier centres seem happy to put in short term tackily presented pop ups which I dont think helps the overall image of the centre in attracting either customers or new quality tennants. And yet we still see centres opening new space.
The big anchor tennants, Target, Big W, DJs might also be in for a bit of a shake up and we can only hope that they retain their existing footprint.
Of the big anchor tenants the department stores are biggest concern. If Australia follows trend in UK and US we can expect closures in near future. There are too many malls with same 4 or 5 anchor tenants. If one chain fails I do not see any takers for the vacant stores.
In some cases landlords may be stuck. If the landlord lowers the rent, that can affect the value of the property as used by banks/lenders when calculating figures for loans. So then the ratio between what the landlord owes on the loan and what the property is worth in the eyes of the bank/lender gets worse and that may affect the interest rate (or in the worst case, lead to foreclosure)