Ready to deal: landlords more open to negotiating retail leases

Landlords are becoming more open to variations on lease agreements with retail business owners, says a partner at one of the big four consulting firms.

Typical variations being entertained by landlords include sharing fit-out costs, rent-free periods, revenue-sharing arrangements and shorter lease periods, says Deloitte assurance and advisory partner David White.

Because retailers are now using physical stores in unison with an online strategy, many businesses are seeking different store designs including less space and potentially more expensive fit-outs.

“Businesses are thinking about strategy slightly differently and what they are using their stores for,” White says.

“Landlords are increasingly adapting as customers get more comfortable with mobile and online purchases and they shape the type of stores retailers want.”

Landlords in Sydney and Melbourne are finding they need to be increasingly flexible with retailers, particularly as overseas retailers with mature online strategies target Australian shores, White says.

Well-known international fashion brands are negotiating leases which could lead to the opening of hundreds of new stores in coming years, according to a recent report by global property group Colliers International.

Sharing fit-out costs could save retailers tens of thousands of dollars, with fit-outs costing up to $2 million, White says. Also becoming common are revenue-sharing arrangements above a certain threshold in exchange for lower upfront rents, he says.

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