landlords can’t afford to continue supporting struggling tenants.
However, this cold war bubbled to the surface last week when Westfield-operator Scentre Group locked a number of its retailers out of their stores, leaving staff and customers frustrated and at the property group’s mercy.
Scentre Group told Inside Retail that it doesn’t comment on commercial agreements with retail partners, and the Shopping Centre Council of Australia said it stands by the rights of its members to have the terms of its tenancy honoured in good faith.
It’s fair to say that the retailers in question – among them Mosaic Brands and Strandbags – don’t see it that way.
“It’s hugely disappointing, and is completely at odds with the approach our other landlords, who are experiencing similar challenges, have taken,” Strandbags’ managing director Felicity McGahan said in a statement to Inside Retail.
“It’s unfortunate that Westfield has chosen to take such a near-sighted approach to a problem that has the potential to last longer than any of us can possibly predict, but that is their decision to take.”
Strandbags saw 38 of its stores shut in Westfields across the country, while fashion house Mosaic Brands saw 129 closed. Between them, hundreds of employees are affected.
Mosaic Brands chairman Richard Facioni also expressed his disappointment, pointing to the 40-year history shared between Westfield and Mosaic’s roster of brands.
The fashion group, which operates a number of brands including Noni B, Millers, Rivers and Rockmans, recently stopped paying rent in stores shut down in Melbourne, and has been paying rent as a proportion of turnover in other states for some time.
According to National Retail Association chief executive Dominique Lamb, the situation has become a stalemate. Many retailers need financial support and landlords are not in a position to give that degree of assistance, with many of them seeing their own revenue plummet and foot traffic disappearing.
That support, said Lamb, should be coming from the government.
“The pandemic has been a unique experience for everyone, and it was hard to gauge at the beginning just how much of an impact it would have on many industries,” Lamb told Inside Retail.
“We are of the view that this area is particularly complex and interrelated and that further consultation should have occurred in order to get the best outcome, rather than the quickest.”
More closures to come?
And while this is the most abrupt action we’ve seen come out of this battle, it’s entirely possible that it is about to heat up – with the Leasing Code of Conduct expiring in September within most states and territories.
“Currently 60 per cent of our surveyed members say they are in ongoing negotiations around rent relief, and these protracted negotiations are a concern and create anxiety and uncertainty for both parties,” Australian Retailers Association chief executive Paul Zahra told Inside Retail.
“Closing retail stores sends a very negative and alienating response to shoppers, which is not in the interests of either the landlord or the retailers’ brands.
“We urge both the retailers and landlords to act in a constructive manner and negotiate in good faith, and share the economic pain that has been caused by the pandemic.”
This story appears in the August 26, 2020, issue of Inside Retail Weekly.
