Rip off rents?

ejmaztec

I wonder what the opinion of the Blanchardstown owners is? It could be bluff and bluster on both sides, but as we haven't got access to the figures, we can only guess where the blame lies.


http://www.irishtimes.com/newspaper/breaking/2011/0401/breaking26.html

A row over rents at the Blanchardstown Centre in Dublin is to result in the loss of more than 100 jobs.
The trade union Mandate said that staff had been informed this morning that eight Arcadia Group outlets in the Blanchardstown Centre will close in September.

Mandate's divisional organiser Brendan O'Hanlon said that the Arcadia Group outlets in the centre included Topman, Topshop, Dorothy Perkins, Burtons, Miss Selfridge, Wallis, Outfit and Evans. He said the stores had 104 staff.

"This morning at 10am, Arcadia management called staff into a meeting to inform them that because of the refusal of the Blanchardstown Centre's management to agree to a reduction in the rents being charged the stores will close in September as their current lease runs out on September 17th next.
"Argos has already announced that it will be closing its Blanchardstown store in July for the same reason."

He said that the closure of the stores were not in any way linked to any industrial relations issues.

Mr O'Hanlon said that staff were "shocked and disappointed" at the development. He said Mandate would be engaging with Arcadia to minimise the number of job losses and to negotiate the best possible terms for those who will be made redundant.

However, he said it would be much preferable if the closure of the stores could be avoided.

He said the union was calling on the management of the Blanchardstown Centre to negotiate more reasonable rents with Arcadia and other retailers.

"The Blanchardstown Centre's management need to 'get real' about the rents they are charging in what is now a very depressed market for retail. It is totally unreasonable for them and other commercial property landlords to insist on maintaining arrangements that were put in place in a very different economic situation," Mr O’Hanlon said.

borderlinemeath

As an ex Arcadia employee I can confirm that the rents on at least 2 of the brands were extortionately high.

The company I worked for after I left Arcadia also has a unit in the Blanchardstown Centre and it's very high for them as well. As far as I remember they were going to do the same thing, pull out when their lease expired as their store wasn't making any money - but the penalty of pulling out of the lease was too high for them to just shut their doors.

Arcadia have a unit in Westend Retail Park with DP/Burtons/Evans in it - they may look at doing the same with the other brands if it can get a unit at a more cost effective lease.

Blanchardstown Centre was built in the mid 90's - at the very beginning of the property bubble - so they can't blame spiralling costs of repayments -
it's more than likely their other investments since then that they are trying to cover. The only addition is the new wing with M&S, BTs and the multi story car park - which is a white elephant now.

wonderfulname

Thats exactly what they want you to say...

In all seriousness we've known for a long time that rents are too high and they simply aren't falling fast enough. Landlords feel they either can't afford to lower them or are delusional enough to think there's still always someone who'll pay what they're looking for. To be honest I have no idea how all of this hasn't collapsed yet.

borderlinemeath

wonderfulname wrote: »

Thats exactly what they want you to say...

??

wonderfulname

Don't worry it was a joke

brianwalshcork

wonderfulname wrote: »

..to be honest I have no idea how all of this hasn't collapsed yet.

Probably because it's being played out over a longer time period due to contractually binding 25/30 year leases with 5 year rent reviews & break clauses, where as residential rentals tend to have weak, unenforced annual leases, so tenants are looking to lower rents every 12 months.

wmpdd3

^^^

That seems to be the case, in one shopping center last year everyone was up for review and the center was unrecognizable after the summer.

I don't think the shopping centers realise what they are up against. I have worked for many high-st retailers that were ruthless with suppliers. The guys who look after the maintenance / tills / fire extinguishers, would never last 13 months. One call out would be late etc and they would be gone.

So many of the British High st are owned by the same parent company. It only takes a few companies to take the high ground and the Irish high street is empty!

Imagine the center without:

Topman, Topshop,
Dorothy Perkins,
Burtons,
Miss Selfridge,
Wallis,
Outfit
and Evans.

borderlinemeath

wmpdd3 wrote: »

^^^

That seems to be the case, in one shopping center last year everyone was up for review and the center was unrecognizable after the summer.

I don't think the shopping centers realise what they are up against. I have worked for many high-st retailers that were ruthless with suppliers. The guys who look after the maintenance / tills / fire extinguishers, would never last 13 months. One call out would be late etc and they would be gone.

So many of the British High st are owned by the same parent company. It only takes a few companies to take the high ground and the Irish high street is empty!

Imagine the center without:

Topman, Topshop,
Dorothy Perkins,
Burtons,
Miss Selfridge,
Wallis,
Outfit
and Evans.

Arcadia will play hardball - if you notice there's no stand alone stores in Dundrum Shopping Centre because the rents were considered far too high. They were approached when the centre was being built about bringing their brands in and they turned them down because of the terms.
They do however have concessions of Topshop and Miss Selfridge in House of Fraser where they pay a turnover % to HoF and not to Dundrum.

Another thing to factor is the rates in Blanchardstown. If the rentals come down to what retailers consider to be an acceptable level - there's a chance that the shopping centre may be rerated if the overall value is lowered. The rates in Blanch are also extremely high - but again based on value.

Arcadia know what they're doing - they will play russian roulette with jobs and livelyhoods because at the end of the day they may get a better return for their investment.

ejmaztec

I suppose that many of these fairly new malls are mortgaged to the hilt, which could be the reason for their being reluctant to drop the rents, but tenants on lesser rents are better than no tenants at all. It seems suicidal to me, as the so-called footfall wouldn't be as much when a whole bunch of stores move out.

My nearest "mini-mall" is in Tralee at Manor West, where the lowest rent is about €200,000 per year. This is paid by a Harvey Norman (with no furniture department) and Petmania to name but two, and a lot of stock has to be shifted to pay the rent.

sandin

Shopping centre rents are just out of this world these days and not much has changed despite the recession.

Finally the larger groups are taking it by the balls and saying drop rents or we're out.

To give an example, a 2000 sq ft unit in Blanchardstown would rent at approx €350,000 + about €30,000 in service charges + about €50,000 in council rates.

wmpdd3

Still shopping centers seem happy to be empty rather than reduce rents:

I have an empty shopping center accross the road from my house with 2 years!

I bet the independent retailers are delighted the big chains are playing hard ball, it paves the way for their negations.

alan100

Will this just be the big chains playing hardball or will they actually pull our because the rents are simply too high?

Argos is already pulling out of Blanch in July 2011 because of the high rent.

This will have a huge impact on the centre if the shops do close....

emo72

if they are not making money, i'd say they will pull out. cant blame them either. id say they will bring in other tenants and offer them greatly reduced rates rather than been seen to give discounts to existing tenants. to save face like.