Calls for radical overhaul of rent reviews
Saturday, March 19, 2011
A RADICAL overhaul of the arbitration system for commercial rents is urgency needed following rent increases of more than 50% being awarded against tenants in the Dundrum Shopping Centre in Dublin.
That was the call issued by chief executive of Retail Excellence Ireland, David Fitzsimons.
It is understood that two clients in the centre, Oasis and Coast, have suffered rent increases of 51% and 55% respectively following arbitration.
A further 45 of the centre’s 120 retailers face the same dilemma in the next few weeks as their results are made known, he said.
Mr Fitzsimons said the process was particularly severe on "the smaller number of indigenous brands" in the centre while some "international brands" with an Irish presence also looked vulnerable to the unfavourable review process.
Dundrum was built by developer Joe O’Reilly, who has had millions of debt linked to the centre transferred to NAMA.
Last year saw the first round of rent reviews since the centre opened in 2005. Rent rises of a massive 80% were sought in some cases despite the sharp fall in retail sales. As a result significant numbers of the centre’s tenants went to arbitration over the rent debacle.
Mr Fitzsimons said: "It is an absolute disgrace that in the 36th month of consecutive decline in the Irish retail industry, when sales levels have fallen over 30%, the allegedly independent arbitration system can come back with recommendations that these retailers’ rents should increase by over 40%.
"Over 45,000 people have lost their jobs in the retail industry over the past 30 months and over 400 stores are closing each month. If the unrealistic commercial rents being demanded by many landlords are not lowered significantly, considerable numbers of retailers will continue to close and large numbers of jobs will be lost.
"We are clear about the changes that need to take place: the ban on upwards only rent reviews for existing leases needs to be removed and the arbitration system needs to be completely overhauled."
The Government has committed to introduce measures to ban upward-only rent reviews and that will be crucial if Ireland’s retail sector, which employs more than 255,000, is to stop haemorrhaging jobs and investment, he said.
The whole system needed to change to an aggregator system rather than comparing prices in similar developments, he added.