Customer Experience. Online Shopping. Redevelopment. There is one thing beyond all of these factors that will have as big, if not bigger impact on the future of Australia’s retail sector. It’s relationships.
For as long as anyone can remember, the landlord tenant relationship has been fraught with anxiety. Discussions necessarily centre on matters such as rental rates, incentives, lease terms, annual reviews and marketing contributions but they are often uncomfortable if not downright adversarial.
There are critical issues at stake for sure, but there is a better way to resolve them, and this just might be a critical step for Australia’s retail ecosystem which is slowly embracing COVID-normal.
According to DMA Partners Managing Director Ryan Andersen, a different style of relationship between landlords and tenants could actually do more to change the face of retail than perhaps anything else in these difficult times.
“For a sector struggling to reshape itself in a pandemic environment, perhaps it’s time to test how a more collaborative process could contribute to a future where everyone wins.
“In any year, our team is working across dozens of retail & mixed use projects and without a doubt the centres which perform best are where the landlord and the tenants work well together.”
Ryan’s three tips for re-shaping the landlord tenant relationship.
1. Things are not always as they seem.
Find out what is really critical to each party in the negotiation. To do that you have to ask the hard questions and be prepared to have them asked of you in return.
Does the landlord need to secure a large face rent to meet financial obligations?
Would a low starting rent and a percentage rent encourage the tenant to sign-up sooner but stay longer? Could a small tenancy be inspired to grow through a collaborative approach to tenancy management and lease structuring? Do they need some help managing their fit out cost and process to ensure the right quality is delivered in a timely manner?
2. Make marketing a collaborative activity.
Marketing, and in particular marketing costs, are a constant source of friction between landlords and tenants. So seek to take this pressure point out of the equation by agreeing on a process to communicate and share information.
It seems simple but it rarely happens very effectively. Tenants tend to be suspicious of providing money to the landlord for marketing but this is because they don’t see how it’s spent or what marketing delivers.
Landlords may be reluctant to contribute funds for promotion over and above the standard centre marketing fund, while tenants may not fully realise the cost and value of less visible (to them) activities such as social media, influencer engagement and content creation.
To maximise results for both the centre and the retailer, there needs to be a genuine partnership where both parties work together, keep an open dialogue and actively participate in the centre’s marketing. At the end of the day successful retailers make successful shopping centres.
3. Don’t handle your own negotiations.
It sounds simplistic but you would not engage a plumber to repair your car, so why leave complex lease negotiations to anyone other than a specialist. Retail negotiations are complex and the final deal is legally binding, often for many years.
Good advice can mean a better deal, more clarity and certainty, and a positive starting platform for the tenant landlord relationship.
Ultimately, Andersen says, “It’s absolutely critical that each party to the negotiation gets their wants and needs on the table and then work through those matters positively and productively.
“You only have to follow the nightly news to know that there are challenging times still to come for everyone in the retail sector so relationships in the future will be critical.
“But perhaps we could smooth out some of the bumps with a more open approach to dialogue where each party – tenant and landlord – have a clearer understanding of each others priorities and requirements.”
