REDgroup says retail rent too high
Collapsed bookseller REDGroup has highlighted rental costs as a major issue facing retailers as part of its submission to the Productivity Commission’s inquiry into the retail industry.
REDGroup, owner of Borders and Angus and Robertson, currently in administration, wrote in its submission – seen by the AFR – that although Australian businesses’ average sales per square metre are equal to those of their global peers, average square metre retail leasing cost costs $770 in Australia, the highest in the world.
“As the bricks-and-mortar retailer revenue model becomes increasingly challenged, so will the current rental cost model,” REDGroup wrote in its submission. “Landlords who have transparency of their tenants’ sales performance will need to review their rent models as retailers start to question the value of bricks-and-mortar stores beyond the ‘flagship’ store in key locations or hubs.”
Borders rented on Pitt Street Mall in Sydney, among other locations. According to a Spring 2010 Colliers report, the average weekly retail rent in Sydney on Pitt Street Mall sat at US$769 per square metre, the sixth most expensive in the world.
Paris’s Champs-Elysees ranked as the dearest retail rent at $1,255 per square metre, followed New York’s Fifth Avenue at $1,250, Russell Street in Hong Kong at $1,205, London’s Bond Street at $1,174 and Milan’s Via Monte Napoleone at $929, according to Colliers.
Concerns over rental costs come as a deed of company arrangement is due to be agreed this week between administrator Ferrier Hodgson and the group’s creditors.
REDGroup went into voluntary administration on February 17 this year owing about $8 million to employees, $118 million to secured creditors and $44 million to unsecured creditors.
