The Nine papers late Thursday night reported actions by Westfield against some major tenants over unpaid rent.
Westfield shopping mall owner Scentre has begun locking non-rent-paying retailers out of their stores in a dramatic escalation of tensions between major landlords and their retail tenants.
ASX-listed retailer Mosaic Group, which operates stores such as Noni B, Rivers and Katies, told investors on Thursday afternoon 129 of its stores in Westfield nationally had been “temporarily closed by the landlord Scentre Group”.
…
Scentre’s approach is the newest escalation of tensions between landlords and major retail tenants over rental amounts paid during coronavirus lockdowns, where many stores were shut or receiving significantly reduced income due to social distancing measures.
Mosaic, along with other retailers such as Solomon Lew’s Premier Investments, have either refused to pay rent or paid a reduced level of rent to their landlords during the period, saying that proprietors should share the burden of the economic crunch brought on by COVID-19.
The ABC published a story about this yesterday.
I was surprised months ago to read that several major shopping centre tenants had stopped maying rent. I have shops in 2 Westfield centres and have kept paying, albeit at a reduced amount and with transparency to Westfield, as I knew at some point, once the national code discounts are applied, there’d be a call what is owing.
While I am interested in any pressure on landlords on rent overall, deliberately not paying rent is not a good negotiating tactic in my view. It will be interesting to see where this story plays out.
I am with landlord on this one, it seems the big shops are asking free rent.
Very intriguing situation. Never before have we had government intervention discouraging and prohibiting face to face retail contact. At the same time we have unprecedented levels of government support and stimulus for affected businesses. Some, like premier investments are actually doing quite well through the pandemic. They’ve taken the hardline with landlords and have seemingly won. Combined with good online sales, their figures have impressed market analysts. You can make an argument both ways. The shopping centre operators have fixed costs that must be met, but through the good times a lot of shopping centres haven’t covered themselves in glory with their hardline contractual tactics. Tenants can well argue they shouldn’t be expected to pay rent (or full rent) when they don’t have fair access to a normal trading environment.
If the pandemic outlasts the government stimulus, that’s when the real battle will begin.
The problem is in the model. It’s a Govt. standard one size fits all when clearly it is not.
It is a case by case situation we only have to look at our own newsagency situtation. I was in Bowral yesterday and the smaller newsagency of two in the Town been there 100 years with lotto comms of $75k- to $100k p.a closed shop guttered.
the other point is that take smiggles orany of the other Sol Lew’s stores and say Premier closes the lot as he threatened then it amounts to say 30-40 stores in each cahin max and probably 5-10 of each in any particular shoppoing Centre conglomerate say Scentre, Vicinity, Stockland Lend lease etv= No really Big dael for the centre owners in dood times however Lew knows now is the time to leverage for the future for there ain’t no takers to replace his stores.
No sides to be taken here it’s a bully Versus bully in the mutual playground.
Our industry case is the one that needs looking at Who does act on behalf of newsagents in negotiating Rents. I hear stories and see some results all of which are terrible- I mean the representation is terrible pathetic indeed no wonder we are lagging in the reail space are within shopping centres to the point even that we have lost the important Centre Leasing executive support of yesterday to one of “we have plenty of listed names to take your place if you don’t sign”
Premier Investments have indeed done well.
Dont pay rent.
Dont pay staff.
Sure fire recipe for retail success.
As Ive asked about this whole lock down situation, how do we get out of this and whats the end game.
The ‘end game’ for any business owner is to run a business that is relevant today and into the future, no matter how much that changes.
Covid is delivering unprecedented changes and in change there is always opportunity. Online is doing very well. In our channel, many newsagents are enjoying double digit growth in-store.
Relevancy for me today is encapsulated in one word, LOCAL.
James, I think you will find a deal has been struck and silence is golden re the solution.
Spot on Graeme
I believe this is just the beginning of the story with Westfield currently targeting the larger retailers who are not covered by the government mandated rental code.
Whilst our channel has been spared to a certain extent due to our essential service classification most retailers have been in a world of pain ignoring rental relief and Jobkeeper. Other than in Victoria most will not satisfy the ongoing relief requirements post September. Further to this consumers are deserting shopping centres for online & high street shopping.
With insolvencies at historical lows due to government support this is the calm before the storm. The pain for shopping centre landlords is just beginning and will only get worse post September. Rents can only fall and the likes of Lew know this.
Steve, being classed essential is a pyrrhic in that traffic in the centres is down 75%. In my own two cases, we continue to trade 50% down while our high street store is up 30%.
I’m not complaining though. In business we take the bad with the good.
Nationally, my guess is that less than 33% of high street, regional and rural newsagency businesses have qualified for JobKeeper version 1.
On the Westfield situation, we are on the edge of a cliff I think. We will either see major national landlords reset their model on occupancy cost, or, independent retailers will exit that retail platform.
More broadly, regional Australia is more appealing than ever and I suspect that is where the most immediate change in retail will play out.
My take on leases and landlords is:
The best tenant in the current environment is the one you’ve already got.
Im not sure that there will be lots of entrepreneurs looking for retail bricks and mortar space in the new COVID normal world.