Time to talk about lease arrangements

PHARMACY owners and managers operating stores in shopping centres are being urged to take advantage of market conditions to secure better lease agreements.

Retail rental expert, Phil Chapman, of Lease1, noted that with valuations across the Australian real estate market in decline, and shopping centre’s experiencing a sharp drop in values, pharmacies could have an opportunity to secure an improved deal on their rent.

“Retailers should be renegotiating lower rents in line with sales decline and shopping centre values,” Chapman said.

“The situation looks particularly dire for retailers located in smaller, regional shopping centres.

“According to Vicinity, the nation’s largest retail landlord, its own portfolio of 66 centres lost about 1.3% of its valuations but a large proportion of those losses were incurred by its 43 regional malls (along with its five neighbourhood centres).”

With the rise of online retailing impacting bricks and mortar retailers and shopping centre landlords alike, Chapman said renegotiating leases may be beneficial for both parties, giving pharmacists the opportunity to off-set declines in dispensary income.

Chapman warned that landlords and tenants will continue to face tough choices over the coming months.

“Negotiating for the reduction of lease rates isn’t going to be easy for both parties, but it can likely be a crucial first step to the survival of the entire shopping mall sector,” he said.