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Jewellers appear to be paying above the odds for their retail rents
Jewellers appear to be paying above the odds for their retail rents

Jewellers’ rent battle goes public

The plight of jewellers battling ever-increasing retail rents amidst reduced consumer spending has been highlighted in the mainstream media by two prominent jewellery businesses.

Shiels Jewellers’ Toby Bensimon and Angus & Coote’s Andrew Oosthuizen were quoted in the Australian Financial Review (AFR) last week, championing the cause of jewellers facing unrealistic rent hikes in a depressed retail market.

In the article, Bensimon described jewellery store-owners as “sitting ducks”, saying that “high rents have pushed us to the limit. When the industry was successful there were good margins to support the high percentage rent ratio.

“We are still paying that premium but landlords are living in a dream world,” he said.

Oosthuizen told AFR: “We have spent a lot of time talking to landlords and in recent times some concessions have been made, but we still have to break the perception that jewellers can pay premium rent.”

Shiels Jewellers operates 50 stores in Queensland and WA and Angus & Coote has almost 150 stores nationally.

Leasing advisory firm South Australian Lease Management supports both Bensimon's and Oosthuizen's claims, reporting that jewellers will typically pay a gross rent of between $2,500 and $3,000 per square metre whereas non-jewellery retailers in similar locations and size pay between $1,500 and $2,000 per square metre.

When contacted by Jeweller, Bensimon further qualified his statement by adding: “Landlords know that we have spent $200,000 to $500,000+ on a shop fit that we need to amortise over a lengthy period before we can reasonably expect the store to turn a profit. In other words, they know that we are locked in to our rents by virtue of the fact that we need a long time to make our stores profitable. 

Toby Bensimon, director Shiels Jewellers
Toby Bensimon, director Shiels Jewellers
“Landlords use this against us by understanding that we have a valuable asset in our store infrastructure that cost us far more than any other retailer in a different category and they increase our rents accordingly,” he said.

“A clothing retailer, in some cases, can simply walk away from a lease as they have no internal cabinets, locks, high tech security or expensive lighting, which are all essential to a successful jewellery store.”
Double standard
Bensimon told Jeweller that higher retail rents, coupled with the rising price of diamonds and gold have squeezed jewellers into a position where they can no longer tolerate this “double standard”. 

He believed jewellers had been unfairly targeted by landlords as “fair game” in rent negotiations.  
“Once a lease is signed, you have very little chance of having a reduction agreed to. Short of a miracle, you have to wait until your lease has expired before you have another chance to negotiate at all. When your lease is up for renewal, the likelihood of a reduction is dependent on your willingness to negotiate hard and over a protracted period added to the risk of pushing too hard and losing the site altogether. 

“For the larger retailers this risk can be worth it, however, for single boutique operators this risk is unacceptable as their livelihood is on the line.”
He added that landlords were still operating on the assumption that it was business as usual when the reality was, according to the head of the Australian National Retail Association, Margy Osmond, retail was going through the toughest period in 50 years with interest rates needing to dip to a record low of 2.75 basis points, below the previous low point set in 1959. 

According to Bensimon, “At this time you would expect all Australian sectors to help each other out, however, the retail sector has been given the cold shoulder from landlords with record profits being posted in their P&L’s while the sector that they should be supporting is entering a period punctuated by hundreds of bankruptcies.” 
Bensimon stated he would like to see the Acts passed in Tasmania and South Australia regarding rents being able to be negotiated in-line with market value and for lease’s to have the right of first refusal adopted by all states or passed at a federal level. 

“This system has operated successfully in Tasmania and South Australia for many years and is a great solution to the problem of inflated rents.”

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