Thu Feb 22

Not all doom and gloom for retail

Written by David Krolikowski

"Retail not beyond saving – but the blame game needs to stop"

With retail groups copping a battering during the February reporting season, a Melbourne commercial property expert says that there is a future for bricks and mortar retail – but only if tenants and landlords commit to work together.

David Krolikowski, of Melbourne’s KHQ Lawyers, said that despite the increasing threat of online retail and changing consumer habits, landlords and tenants needed to embrace the idea of collaboration and share the burden of increasing costs for a successful future.

He also suggested that bricks and mortar retailers needed to change the way they sell in order to offer a distinct point of difference and keep customers coming back.

“Amazon’s arrival in December led to analysts forecasting retail doom and gloom, while many large retail groups are feeling the pressure as they deliver half year results,” Krolikowski said.

“Landlords and tenants need to accept the reality however and tackle the online challenge head-on to keep physical retail operating successfully.”

“Overall, those invested in bricks and mortar property (shopping centre and shopping strip owners and their tenants) need to work together to confront the changing face of retail –that is primarily online alternatives, but also by pop-up shops, and a community that is increasing connected both with international suppliers and each other.”

“Landlords who expect that tenants will absorb all increases in outgoings while maintaining or increasing base rents are killing their golden goose, so to speak, so they need to reset their expectations, with an eye on market changes, rather than simply seeking year on year growth.”

“In the current environment it’s not realistic for landlords to simply forecast increased revenue year on year. But when that expectation is imposed upon their staff in the form of KPIs, it can be very difficult for a leasing executive to take a softer stance, without being seen to have failed.”

“Then there is a tendency to blame the other party. Tenants who continue to do retail the same old way and expect to obtain the same returns are kidding themselves when they blame landlords solely for their woes.”

“The challenge for businesses is to do it better – be active in marketing programs, take advantage of opportunities to advertise, and experiment with things like temporary attractions, or taking on space near competitors to maximise ‘critical mass’ foot traffic.”

“Likewise, landlords that expect that their only role is to provide a physical location for tenants to occupy, consider it’s up to the tenant to do the rest, will find themselves with increased vacancies.”

‘Offering something that isn’t available anywhere else, or by providing another reason for shoppers to visit – like cafes and food outlets should all be a part of forward thinking, and again that is something that needs to collaborative.”

“It’s nothing new, but it’s not that common either.”

Krolikowski added that retail tenants operating in traditional retail sectors also needed to consider that as times are changing, they might be squeezed out by the next phase of retail tenants – such as health services, personal services, food & beverage, even car manufacturers.

“At the end of the day, retail still has a future – it simply needs to adapt, and that goes for both landlords and business tenants”, Krolikowski said.

"The challenge for businesses is to do it better"

Not all doom and gloom for retail

"Retail not beyond saving – but the blame game needs to stop"

"The challenge for businesses is to do it better"

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