As “supachicken” says rents are fixed with consumer price index increases or a fixed amount annually plus outgoings for rates, taxes and utilities (water, gas & electricity).
We are situated in Western Australia where rents are ridiculously high, as is everything else due to high investments from a mining boom that has been going on for quite a few years now. We have some of the highest rents per sq mt in the world.
It is ridiculously hard to get good rents in sites where you are visible and it is viable. We pay $530 per sq mt p.a for a 122 sq mt shop on the outside of a medium shopping centre, and pay a 5% fixed increase each year. Other shops in our centre are paying $650 on the outside (like ours) and even more for in the mall shops. Our average rent, including outgoings is around $2,400 p.w.
Landlords will leave a place vacant rather than reduce rents, or they have no problem putting in another similar outlet to yours. Restrictive covenants are a thing of the past when dealing with these vultures.
Plus shopping centres are going up in new suburbs all the time even though there are plenty of empty shops in current ones. With our compulsory Superannuation (retirement plans) funded by employers at 9.25% the funds are flush with money and are investing in retail buildings, so the more money coming in the more investment in new properties.
The only cheap rents are the old areas where they used have have the strip of shops areas, but these are usually the older inner suburbs which are now being re-developed into chic inner city living so these shops are being swallowed up by trendy restaurants thus driving these rents up.
Before too long it will be the major national groups (in every field of retail) that will be around as family business fold under the intense rents pressures. Those lucky enough to be in the situation as “supachicken” where they have non greedy landlords will survive longer.
Dave
