Retail Rents Seminar - Knight Frank/ Lemans Solicitors
Date : 23 February 2011
The current challenges of the retail rental market and the way forward were presented to both landlords and tenants at a Business Breakfast seminar, held jointly by Knight Frank Ireland and Lemans Solicitors this week (February 2).
Keiron Diamond, director and head of retail property Knight Frank Ireland, said that mutual understanding of problems facing both parties is vital.
Mr. Diamond, who has been very actively involved in dialogue between landlords and tenants over the last three years, pointed out the need for flexibility in reviewing rents and making downwards adjustments as necessary. He told his audience that he has successfully renegotiated rents downwards for a wide selection of retailers.
He outlined the growth of ‘Turnover Rents’ and the variety of options available, but said that these would not suit all retailers or landlords. He emphasised the importance of trust needed between the parties and said that there were both pros and cons associated with this option.
The importance of the role played by banks in facilitating renegotiated retail rents was emphasised by Keiron Diamond. He also spoke on the effect that the abolition of upwards only rent reviews on new leases has had on the market, with the reality of a two-tier leasehold interest market, and the importance of tenants understanding the rent review process.
John Hogan, partner at Lemans solicitors said that “the courts are now recognising the collapse in retail rents on Grafton Street” and cited two recent Circuit Court cases, Burger King and Celtic Jewellers, which secured rent reductions of 53% from the peak rents they were paying.
“In both cases the landlords were forced to court by the tenants exercising their technical lease entitlements. Not every tenant will have the same rights.”
“Forfeiture of leases will be on in the increase in 2011”, stated Mr. Hogan. “NAMA and the receivers are moving in and will have little or no patience. The tenant brand name means little and, with examinerships putting landlords at the back of the creditors queue, it is more important than ever for landlords to manage their tenant relationships and keep on top of their rent payments.”
In John Hogan’s opinion a change of government will increase the pressure for pro-tenant legislation. He said that “the courts are clearly showing that they have no sympathy for Celtic tiger rent demands.”
John Mockler, managing director of Knight Frank Management Ireland, stressed the importance of proactive property asset management in the redefined Landlord & Tenant relationship that now exists.
“Businesses are ever more mindful of their total property costs including rent, service charges, insurance and rates, and seeking ways of reducing their overall costs of occupation", he said.
"Landlords of shopping centres and other commercial buildings face the ongoing challenge of maintaining the proper operation of these properties, while they remain part or substantially empty. Cash-flow from service charges is vital to enable payment to service providers of security, cleaning, maintenance and so on, and landlords are likely to be obliged to contribute to the service charges for vacant units from rental income."
Mr. Mockler advised that best practice in management and service charge administration for commercial property is guided by the IPFMA (Irish Property & Facility Management Association)/SCS (Society of Chartered Surveyors) Service Charges Code of Practice “which promotes transparency and we look forward to today's leases referring to and incorporating clauses from this benchmark."
Further information:
Keiron Diamond, director and Head of Retail, Knight Frank Ireland, Tel: 01 6623255
John Mockler, managing director, Knight Frank Management Ireland, Tel: 01 6623255
Sandra McDowell, McDowell & Associates PR, Tel: 0402 21576 / 087 2564350