AROUND 10,045 small and medium-sized retailers in shopping centres across Australia have received rental assistance with Victoria accounting for the lion share, as small businesses warn of the “ticking rental time bomb” which will most likely bankrupt many operators.
According to data from the Shopping Centre Council of Australia, the number of Small and Medium Enterprise (SME) retailers receiving rent relief at the end of July is 19% higher than the previous month.
The largest amount of assistance has been rendered to retail categories most heavily affected by government restrictions; food and catering service providers including restaurants, cafés and takeaway food services make up 29% of retailers receiving rental assistance; retail services including hairdressers, beauty therapists and shoe repairs make up 19% and clothing, footwear and accessories make up 13%.
SCCA executive director Angus Nardi said shopping centres are doing their best to support retailers through this incredibly difficult time for the sector.
“The most important outcome is that ‘mum and dad’ retailers are able to stay established in centres, ready to welcome customers as they return,” he added.
Government restrictions were cited as the main reason for seeking rental assistance, with more than two-thirds (64%) of the total agreements relating to retailers based in New South Wales and Victoria, and Victoria the most over-represented jurisdiction as a proportion of retailers obtaining assistance.
“COVID-19 and the subsequent government restrictions have had a profound effect on retail but shopping centres have remained open across the nation and footfall is increasing as restrictions have eased and consumers become more confident to continue with their daily lives.
“Easing restrictions in most states across the nation is driving increased footfall across the nation, excluding Victoria. As we move towards the Christmas season we would anticipate consumer spending to pick up too in line with previous years, however prolonged and uncertain restrictions on trading conditions would put a traditionally lucrative end of year for retailers in jeopardy,” Nardi said.
LPI Group, which controls dozens of children’s play space franchises, including Lollipop’s, Kanga’s, Tutti Frutti and Crazy Climb and operate around Australia, has warned of a “ticking rental time bomb” in Victoria.
Founder Bret Stremski said LPI Group is one of these businesses staring down the barrel of in excess of $80,000 or more in owed rent for at least six centres currently closed or has had their sales massively impacted by the Victorian lockdown.
“In short deferred rental payments will be the death knell to many businesses in Victoria,”
“The legislation requires 50% of our rent to be deferred and repaid later,” Stremski said. “This appeared reasonable at the time, but is now a burden that will most likely bankrupt many small businesses.”
Stremski said Lollipop’s Playland and Cafe Bentleigh East is one such small business feeling the pain. The business which has been successfully established for over 20 years is accruing rental costs of close to $9,000 a month and will likely owe the landlord $80,000 in deferred rent by the time they reopen.
“Add to that, the cost of minimum utilities, phone and insurance (that requires continual payment) and the costs continue to mount. The government grants available are but a drop in the ocean compared to the growing debts.
“If you extrapolate the data to just this small franchise group, Lollipop’s Playlands (with 12 sites in Victoria and 27 in Australia), the figure becomes closer to 3/4 of a million dollars for Victoria alone. Apply that amount to all the small businesses now in the extended lockdown and the numbers are staggering,” he said.
“Although the rental legislation may appear to be fair i.e. the landlords and the tenant are sharing the rent 50/50 this is not the case. As a small business that was forced to close LPI Group has received zero income yet must continue to bear the cost of 50% of the rent on a building unable to be used. If the small business has no guarantee of income why then should the landlord?
“The other point to consider is most small businesses are just that; small and trying to build equity. Most commercial landlords already have a large equity position which allowed them the capacity to become landlords in the first place. As such, the landlords are in a better position to receive no income than the small business owners. The end result of this legislative inequity will be a devastating economic impact that will be felt for years to come. Further exacerbating the situation is a government under so much pressure they don’t see it coming,” he added.
Stremski said the only way to defuse this hidden economic bomb is legislation that shares the pain equally across the nation.
“Particularly in Victoria where businesses are experiencing an extended lockdown. In short, the landlord should receive no deferred rent while the small business owners receive no income. This should also be extended through to banks receiving no interest during this period, not just capitalising it to be repaid later so that all share the burden equally,” he concluded.