Lack of leasing transparency in Victoria, WA and SA hurting overseas investment and smaller retailers

A lack of leasing transparency in Victoria, WA and South Australia is hurting smaller retailers and discouraging international retailers from setting up in these states, according to leasing information provider Leasing Information Services (LIS).

Simon Fonteyn, director of LIS, says he is aware of at least one overseas retailer who is reconsidering entry into the Australian market due to a lack of information about leasing costs in these three states.

There is no requirement for leases to be registered in Victoria, WA or South Australia.

In NSW and Queensland retail leases must be registered with the Land Titles Office and then become a public document, which anyone can access to learn more about the market.

Fonteyn told the Australian Financial Review this lack of transparency “was creating a lost opportunity for these states” when it comes to attracting global retailers.

He says there evidence suggest that there leases are being mispriced in markets and particularly hurting smaller retailers who often ended up paying too much rent.

Smaller retailers, Fonteyn says, lack the informal networks needed to operate in states where data was not readily available.

The recent Productivity Commission inquiry into retailing found evidence that smaller retailers were paying higher rents in shopping malls compared to larger tenants.

In its submission to the inquiry, Westfield admitted that major tenants such as supermarkets and department stores had a strong negotiating position and pay lower rents per square metre than smaller retailers, but said they contributed more capital to the construction of the store, “take longer-term leases, up to 30 years in some cases, and take much larger stores”.

The government’s response to the Productivity Commission inquiry supported the states and territories examining whether to introduce a one-page summary of key lease terms and conditions to address the imbalance between landlords and retailers.

Russell Zimmerman, executive director of the Australian Retailers Association agreed with Fonteyn that retailers, who are unable to find out how much rent their competitors are paying were at a disadvantage when negotiating with landlords.

According to Zimmerman, NSW has the best model of lease registration but it could be more transparent by disclose incentives such as assistance with marketing and rent-free periods.

Western Australia is currently consulting with the industry on ways to improve access to retail lease information and is seeking submissions by July 25.

However, there is resistance to the idea of lease registration in Victoria over concerns that it will cause delays and make leasing transactions more expensive.

South Australia has no plans to consider requiring lease registration.