Well it has certainly been an interesting couple of months in Retailing during the peak trading period and the issues have been wholly diverse. From the hype of Amazon opening their first Australian Hub there has been plenty of noise covering a large amount media real estate.
As we look back over past years and Retailers leave behind the prosperous holiday trading period for the handbrake months of February and March, there is a common practice to dwell too much on all this negative noise. When in fact the savvy and successful Retailers are well and truly finished planning their assault on 2018.
One New Years’ resolution that needs to be kept is to your Retail Shop Lease, and to plan the “Lease Year” ahead.
This a great time of the year to pull out your lease from the bottom draw and sit down and read from cover to cover, mainly due to the fact that most leases are not entered into during January/February and hence more than likely your lease anniversary will be later in 2018.
Which is what we mean by planning the Lease Year ahead, as there are events throughout the year that need your attention and more so your time and resources if you are to be an effective Lessee and (where possible) cease opportunities to create savings and add to your bottom line.
These events may include the annual rent review, outgoings estimates, outgoings audit/adjustments, certificates of currency (insurances), sales audit reports and the often-forgotten Air Conditioning servicing (or other maintenance required under the lease).
Now I know most of you will say “what can I do to plan and benefit from these lease events?” well, let me give you some examples of how you can be effective:
Annual Rent Reviews: rather than just waiting for and accepting this fixed annual increase-review your occupancy cost bench marks and seek to have the discussion about this review being waived to realign same. Note: this should be addressed at least 2-3months prior.
Outgoings Estimates: review these and query increases and charges, remember you are only to pay for the services from which you receive a benefit. Note we see too many paying for Trade Waste and Water charges that don’t belong to them.
Outgoings Audits: same as for annual estimates query large increases and how these are recovered and apportioned-your lease will set out the formula. Note: if the area of the centre has increased in recent years has the percentage you pay for outgoings reduced?
Insurances: here is a great place to save by planning well in advance to review your insurance and indemnity needs under the lease and get several quotes. Note: most leave this to the last minute and don’t review let alone seek to find value and savings.
Maintenance: the major one here is where you are responsible under the lease to maintain items such as the air conditioning units, again seek to review, plan and get competitive quotes. Note: too many don’t even understand their responsibilities under the lease here, and when the A/C breaks down and needs replacing – the Landlord asks “where is the maintenance contract?” Guess who ends up paying for the new compressor or entire system!
Every lease is different so reading and taking note of the annual events captured in your lease and planning to take proactive steps has proven time and again there is savings you can extract from what most treat as a set and forget contract and leave it gather dust in the bottom draw.
Now if by chance you have a major lease event such as a lease expiry or option and you aren’t already well down the path to negotiating the right outcome, then you face starting the year off on the wrong foot.
If you need advice, contact the Australian Retailers Association Member services team on 1300 368 041 (option3).
Phillip Chapman, Director, Lease1