How to achieve the best deal on your retail lease

BY Australian Retailers Association
03 October 2016

In considering the best way to deal with your landlord, it is clear that information is key. Even before entering negotiations, there are a number of important elements that must be taken into consideration.

Frame the conversation

When first setting out to discuss/negotiate any element of your lease, you need to be clear from the outset as to what is the agenda. Without an agenda and clear frame work of what the discussion is about it becomes easy for the Landlord/Agent to pick up on your lack of direction and take the opportunity to turn this around to meet their objectives.

So pre-announcing the issue(s) and setting an agenda beforehand will display that you are there to reach an outcome.

Introduce other partners in your supply chain

Be prepared to include your wholesaler, brand managers and/or franchisors into the conversation when discussing possible solutions with your landlord. Don’t be surprised if your landlord seeks to identify the level of financial assistance your brand/franchisor is providing. There will be an expectation that the landlord is not the only one involved in sharing the risk and effects from the outcome of lease negotiations.

Record, document, follow up and deliver

It goes without saying, but you need to take notes, keep an accurate document trail and set effective follow-ups from any meeting you have with your landlord. A handy tip is to email/write to the landlord after each meeting confirming the points and views discussed. This will remove any doubt between each of the parties. It would come as little surprise that the major cause of disputes is due to parties not having a thorough record of the discussions held. Documentation of all your discussions is key - and be warned, if you don’t write them down, you won’t be able to prove  at a later date that something was actually done, agreed or conceded.

Keep the dialogue flowing

As part of your ongoing lease management, you should conduct a quarterly review of your benchmarks for occupancy cost and turnover per square meter to ensure the processes you adopt to increase sales and manage lease costs are delivering improvements. If not, you will need to review with your landlord in order to explore other options for improvements in your pharmacy business to build resilience for your business.

Be clear on what you want to achieve

Go into discussions with your landlord with a clear picture of what outcome you are realistically seeking to achieve. Possible outcomes to consider include (but are not limited to):

  • reducing your lettable area
  • reducing your rental or occupancy costs
  • seeking a waiver of a rent review (or series of rent reviews)
  • reducing an annual rent review
  • seeking to have rent waived for early payment
  • seeking to have re branding (or other such works like new signage) paid for by the landlord
  • relocating the business
  • renewing the lease early to value-add the landlord’s investment in lieu of a rent reduction

Do not be afraid to ask for changes in the lease agreement

Be very wary if, after you have settled on the business terms, the landlord or their representative presents you with the “execution copies” of the lease and asks you to sign them. When negotiating a lease, you should keep in mind that there are no set terms in a lease. That means, just like the amount of rent to be charged, everything is negotiable, provided the issues are raised early in the negotiation phase.Be very wary if, after you have settled on the business terms, the landlord or their representative presents you with the “execution copies” of the lease and asks you to sign them. When negotiating a lease, you should keep in mind that there are no set terms in a lease. That means, just like the amount of rent to be charged, everything is negotiable, provided the issues are raised early in the negotiation phase.

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ABOUT THE AUTHOR

Australian Retailers Association

Founded in 1903, the Australian Retailers Association (ARA) is Australia’s largest retail association representing Australia’s $310 billion sector, which employs more than 1.2 million people. As the retail industry’s peak representative body, the ARA works to ensure retail success by informing, protecting, advocating, educating and saving money for its 7,500 independent and national retail members throughout Australia. For more information, visit www.retail.org.au or call 1300 368 041.

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