Covid revealed a vulnerability of major shopping centres that attract crowds, a vulnerability that remains on show today, in February 2021.
Whereas shopper traffic in high street retail is at pre-Covid levels and, often, ahead, in shopping centres traffic remains flat in some and down in others.
Try and they might, major landlords are struggling to attract the numbers of pre-covid, and this is impacting retail, especially small business retail. this brings me to newsagency businesses.
More traditional newsagency businesses rely on the habit based shopper. A certain number of this type of shopper has found satisfaction elsewhere, outside of major centres.
I think this is a factor in some of the shopping centre newsagents I know looking for space outside. I am one of those.
With major landlords unwilling to reset occupancy cost – yes, they are pushing increases, not offering decreases – the value proposition considering the lower traffic is not there. Something will have to give from landlords if they want newsagencies to remain. However, I suspect they are not as interested in the newsagency channel.
There is appeal for kiosk based lottery outlets. However, with supermarkets covering basic magazines, cards, newspapers and stationery, our shingle is not the must-have it once was. I have no issue with that. My concern is for newsagents who feel they must be in a centre and end up agreeing to a higher occupancy cost.
Having traded pre and through Covid in high street and shopping centre situations, there is no doubt that for the medium-term, high street has a far greater appeal, because of the return that can be achieved through the control you have.
I think you will find Kiosk lotto retailers also considering their options. Non essential and therefore lock down vulnerable. Premium rental rates over and above regular shopping centre space and largely foot traffic driven. Not an attractive combination of factors. The longer the masks in shopping centres rule continues, the more, particularly older, shoppers will find a reason to seek more comfortable alternatives.
James, I agree with you,and being objective reflectingn over 40 years, Shopping Centres and Occupancy Space attitude is much the same.
The current situation has polarised the difference between COVID affected relief and the attitude to the renewal of a lease.
In my considered opinion Kiosks are all you say they are, more to the point Shopping Centre Leasing is encouraging newsagents to take this option. You identified the reason correctly The cost of space p.s.m. (per square metre) is increased with the more foot traffic as enticement. It is a short lived solution. If we can’t make our product Sales work for us the we are on a hiding to nowhere.
Shopping centres only value Sales and Traffic flow lotto gives them the traffic flow. they use the lotto traffic to pull people. They don’t care about a newsagency per’se.
Newsagents need to look at the performabnce of their product p.s.m. and I “gotta” say, the so many reports I have conducted show this as their biggest failing the reurn on space for -Stationery -usually product choice- Magazines -Fixtures versus nett Sales-Gifts-not matching Card sales I could go on Mark says it here everyday in mone way or another.
Shopping Centres have now split the difference between COVID affected Rent abatement and the discussion of Lease renewal as totally take it or leave it (the usual approach) for renewal and the Mandatory guideline for those that get Jobkeeper.
unfortnately many newsagent are not reciprients of Jobkeeper as their turnover doesn’t drop 30% howver we operate on lower G.P and this is the telling difference.
Two very different situations. This leaves the newsagent in the position to decide.
Mark, I believe this is one of the most important posts stating the current situations facing newsagents today that has been made.
Landlords are playing the ultimate game of captive tennancy versus what they the tennant has to lose although they are at a loss position to what what they can bargain for to re sign.
Bastards. in a word.
Kindly put their self interest is not ours. We are left with the problem of how do we handle this?
Re kiosks, I agree they are not the solution for the retailer. Personally, I’d not run one in a shopping centre.
In terms of how we handle this, speaking for myself, I advised Westfield in December 2019 that unless there was a fair reset to occupancy cost I will exit their centres. Unfortunately, there will be others keep to take my space when my lease ends. That is their decision to own.
From a channel perspective, all we can do is continue to explain the costs and the risks, so people are informed.
Spot on Mark. I have two shops in shopping centres in Queensland. The leases are up later this year. So far, the landlord is pushing for a 10% increase which they say is to market. I am breaking even at the moment. Unless they budge I will close both shops. I am not too worries because like you I have some experience outside a centre and that is working well for me.
A word of warning. I used a lease negotiator and they achieved nothing for me. Cost me thousands. There are people claiming they can get a better deal for newsagents when in all likelyhood they can’t. So be careful is all I will say.
Related to all this is Tabcorp. They are silent and not helping their retailers. I wonder why???
Covid will be with us for some time .
Recent modelling suggests it will take 7 years to rid the world of Covid 19 whilst this is an estimate only it does reflect the view that Covid 19 will be a factor in the medium term especially when international borders are reopened.
When it comes to landlords and leases, they may not have a choice in regards to what they charge for rent.
If the landlords lower the rents, that can decrease the book value of the property which means the LVR on the bank loans goes up and that might lead to banks calling in the loans or increasing the interest rates or otherwise penalizing the landlord.
So the landlords may need to increase their rents to keep their creditors (banks or otherwise) happy.
Jonathan – too true as this is the position they are taking, however, when the cycle of what goes ’round comes ’round such as this exists they either join the ring or take the consequences. At the moment the Landlords in major shopping complexes vaule newsagency Occupancy average as 23% of Sales whhich are judged bY Sales with stock plus Commissions such as Lotto.
Now if a newsagency can get a reasonable return from this equation (which in many cases equals over 50% of their G.P.) they should show others just how they do it. By reasonable $80k wages for 2 partners working 40hrs each p.w. plus a R.O.I. on the risk capital invested.
So as newsagencies close in shopping centres as many other retail stores have done the Landlord still puts up te rent?
There’s a trend towards tobacconists getting lotto licences and replacing newsagents in sub regional size centres. Labdlords are favouring higher rents over tenancy mix. It is hard to compete with tobacconists who employ foreign workers and are happy to earn a lower profit margin as they seek scale. I think this inevitably devalues the centre, but short sightedness has been a hallmark of many landlords for some time now.
Jim, what is going on with the tobacco and fuel outlets picking up existing lottery outlets as well as gaining what appear to be easy approvals for new outlets is appalling.
Appalling as it is and it is it’s factual.
CTC and other tobacco outlets are continually looking for high Lotto sales outlets on strip shopping areas for as little as they can pay for them.
The sad thing is that Tabcorp approve of this. The Government of the day shoud not bow to an industry that is a proven Health risk especially with a product such as Lotteries which in NSW the great Labor Party Premier Jack Lang introduced as monet to be raised to pay for Hospitals.
The irony alone is enough to make one weep.
Any current Government would relook at the risk versus the income and take a moral stand on health so that those that smoke have to pay the price.
Right now Tabcorp/Lotto is approving EG service stations as Franchisees on their Lotto network.
I seem to recall an article in one of the Melbourne community papers recently setting out much of the malaise affecting lots of shopping centres. The food court in the centre I’m in was already looking a bit sparse before the COVID lock down, with another two outlets boarded up since. I reckon the food court is a bit of a foot traffic canary in a coal mine.
I dont have an answer to the conundrum, except to say that the foot traffic premium for shopping centre retail space is an outdated model and increasingly so. Its had its time in the sun and retail is now something different to whatever that was. And the replacement tennants in these centres play by a different set of rules that at some time in the future will come under closer scrutiny. The combination of all these factors is most unattactive.
James, you’re right about food courts. Those vendors are in greater a world of pain than that of other shopping centre tenants.
Australian property developers and shopping centre landlords have had decades of success. That they may be facing a period of reckoning is, I think, a good thing. While I see challenges for tenants, they are no greater than the day to day challenges of dealing with the landlords.