Home' The Channel Magazine : The Channel April 2016 Contents 58 | The Channel
One of the most common questions I am asked by
newsagents is how to negotiate a rental rebate, be it
permanently or just for a limited time, even though they have
a lease on foot.
In this light, I thought I would provide some thoughts as to
how to approach your landlord for rental assistance; but
before I do I think it is important that we first explore why, and
if, a newsagent might need a rebate in the first place.
Whilst I am a retailer’s advocate, I think it is important that
we are honest with ourselves when considering knocking on
the door of the landlord to ask for financial assistance. When
I say honest, I mean taking a good hard look at your business
and asking yourself, “Is my level of rent the real issue or is my
business fundamentally lacking in other areas?”
A newsagent client once asked for my advice about seeking
a rental rebate from his landlord, as he felt that this would
improve his bottom line. After talking with my client for a
while, I learned that his business’ annual turnover was about
$180,000 (including lotteries) and that it made a loss of
about $40,000 the previous year. His gross rent was just over
$24,000 pa, however he was adamant that his rent
needed to decrease as it was far too high and this was his
Whilst I wanted to help this client from a leasing perspective,
it was very obvious to me that the real issue wasn’t rent, it
was a fundamental problem with the business itself. Annual
turnover was way too low, in fact my client admitted that his
sales should have been around $1 to 1.2m pa, rather than
$180k pa, particularly given that he was positioned in a good
location on a busy high street with lots of passing shoppers
and no serious competition.
In my opinion, no amount of rental rebate was going to
materially improve this newsagent’s financial position—even
if his landlord agreed on a 50 per cent or even 75 per cent
permanent rent reduction, it would still mean that my client
would make an annual loss between $22,000 and $28,000
based on the previous year’s performance.
In this particular case I advised him not to focus on a rental
reduction at all, as this was only scratching the surface and
really a distraction. I suggested that he needed to take a
much closer look at his operation. After seeing the shop for
myself, it was pretty obvious why turnover was so low; the
state of his fitout was appalling. I’m talking about cobwebs,
blown lights, paint peeling off the walls, worn carpets and
very low stock levels. To compound the issue further, his
customer service was even worse than the state of the fitout!
It was very obvious this was not a rental issue; this was an
operational issue. In the end I recommended that he seek the
advice of a very successful ex-newsagent associate of mine
who had set up a consultancy business to assist newsagents
in financial trouble.
Of course there are situations where securing a rental rebate
is not only helpful, it should be your expectation.
In a shopping centre environment where a landlord is
conducting a major re-development and during the course
of construction they impact your business. In these
circumstances most states and territories in Australia
have legislation in place that permits tenants to claim
compensation, and that includes rental rebates.
If your leased premises are unable to be occupied due to
some form of natural disaster such as fire, earthquake or
flood, many leases allow for rent to abate for a period of time.
On rare occasions (again in a shopping centre environment)
if there is a significant change with one of the major tenants,
this can have a very serious impact on traffic flow. I have
witnessed a number of major tenant store closures, which
dramatically impacted the specialty shops within the shopping
centre, some so badly that customer numbers dropped
violently. In all of these cases the landlords were impelled to
offer large rental rebates to all the specialty shop tenants.
So what about the situation where you actually have a strong,
vibrant newsagency that has a reasonable turnover, however
you are struggling to make a profit and are fairly certain
that you are paying a much higher rent than many of your
neighbouring tenants. Even though you have a lease in place,
I do believe it is worth talking to the landlord. However, you
need to consider the following.
First of all we need to understand the perspective of the
landlord. Whether they are a small private investor or a large
I need a rent reduction!
...Or do I?
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