As anticipated, with the Government support and legislation protecting retailers ending, the majority of Landlord’s have now commenced finalising covid support and pursuing covid related debt.
Adding to the complexity of these discussions are the deferred arrears compounding with increased costs to business due to the labour shortage, increased cost of utilities, transport, stock shortages as well as increases to cost of goods. Whilst some Landlords have engaged in some level of commercial discussions, others have taken a more fixed stance. As a result, there has seen a substantial uptick in both rental abatement requests and disputes.
A major focal point amongst the industry has been rent reviews/ increases. There is a strong pushback from retail outside of VIC on committing to CPI + 2.5% increases due to inflationary pressures (5.1% in March quarter). There is also much debate and pushback over the standard fixed 5% increases as growth in consumer sales continues to lag well behind and potentially may regress in some categories as interest rates continue to rise.
Very modest retail growth is false as it’s inflation based, not real growth. If retail sales are reported at 1% to 2% growth and inflation at 5% then its already -4%.