Spencer St receivership highlights shopping centre struggles
Friday, July 15, 2011/
Start-ups have been warned to think twice before taking out a lease in a major shopping centre after it was revealed that Spencer Street Fashion Station has been placed in receivership.
The Melbourne-based site, which has more than 100 stores, is owned by debt-riddled company Austexx and was originally developed as a DFO discount store.
Lenders to the centre, owed up to $540 million, have appointed insolvency firm KordaMentha as receiver with the firm’s Craig Shepherd saying he would work with tenants to promote the centre’s stores and its future financial stability.
The centre is the third Austexx shopping centre to go into administration in less than five weeks.
Last month KordaMentha was appointed receiver of Flinders Plaza at Townsville in north Queensland, with the firm saying it would seek a new developer for the site.
Earlier this month another Austexx-owned centre with 38 retail tenancies in the Victorian town of Torquay went into administration.
Russell Zimmerman, executive director of the Australian Retailers Association, says small retailers should be wary about going into in a shopping centre.
“While retail trade is flat rents for bricks-and-mortar stores continue to increase, driving up prices for consumers and ensuring a sustained retail exodus from the market,” Zimmerman says.
“The oligopolistic nature of shopping centres’ ownership and a retail tenancy regime skewed in favor of large-scale landlords presents an inherent disadvantage to Australian retailers.”
The ARA says a raft of retail tenancy reforms are needed, including third party reporting of turnovers to avoid instances of “predatory negotiations” by landlords based on specified knowledge of business activity.
“An existing tenant should be able to seek an independent market rental valuation of their tenancy as a condition of entering into a new lease, particularly as there is not currently a market rate for commercial tenancies,” the ARA says.
Aaron Gadiel, chief executive of property group the Urban Taskforce, says the problem lies with town planning, which assumes every retailer wants to operate in a shopping centre.
“The biggest problem a lot of these large shopping centres face is congestion – getting good and timely access to the centre,” he says.
“The challenge for retailers is going to be if you’ve got a format that requires relatively easy access to your business, so a shopping centre hub may not be the place for you.”
Gadiel says businesses selling larger items, such as furniture, white goods and gardening and building supplies might be better off distancing themselves from shopping centre hubs to provide better access for their customers.
“Even specialist food retailers and those selling handcrafted products, might not benefit from operating in a shopping centre because of the congestion,” he says.
Retail expert Deb Templar says too many small retailers are drawn to major shopping centres for the foot traffic they generate.
“In major shopping centres there are so many people walking past but retailers forget the key words – walking past. People aren’t necessarily there to shop,” she says.
“If you are going to operate in a shopping centre I suggest you go and watch what people do to gauge how many stores they actually enter and where they’re located.”
Ferrier Hodgson partner James Stewart expects more retailers to fall into administration as the sector struggles to entice consumers to spend.
“These are the toughest retail conditions in the past 20 years and a lot of the ability to survive in this market will come down to the strength of people’s balance sheets and underlying business models,” Stewart said earlier in the week.
Ferrier Hodgson, administrator of women’s fashion group Bettina Liano, is also handling outdoor clothing company Colorado, bookseller REDGroup Retail and men’s fashion chain Ed Harry.