They're all pushing the same trolley

This week the Productivity Commission reported on its inquiry into the 300,000 retail leases around Australia.

The inquiry stemmed from the grumbles and disputes inevitably present in commercial relationships.  But the PC found reform is most needed in regulatory matters.

Shopping centres were the report's main focus.  These now comprise about 40 per cent of retail space but are facing stiff competition from newer retailing forms such as the bulky goods centres and DFOs.

Australian shopping centres with all outlets undercover are somewhat different to those overseas.  In the US the centres are often owned by a department store, while both there and in Britain supermarkets are seldom located within the centres.  Thus turnover per square metre tends to be higher in Australia.

Many of the major owner-managers -- such as Westfield, AMP, Gandel and Centro -- are taking the Australian formula overseas.

The PC inquiry covered a range of issues.  Some smaller retailers claim they are paying excessive rents and subsidising "anchor" clients, such as Coles.  The PC found rate differentials to be justified by the traffic the anchor store brings in.

Rent reviews, stipulations on opening hours or changes to the centre layouts were other areas of dispute.

The Australian Competition and Consumer Commission however has found retailer disputes that have genuine merit are few and declining.

The PC's findings support this.  The report states shopping centre vacancy rates are less than 1 per cent and the vast majority of leases are renewed.

The PC suggests legislation to protect the tenant is getting out of hand.

Their report shows how management of a centre provides advantages to tenants as well as the landlord.  Skilful management ensures the centre is attractive to consumers by getting the right mix of outlets and weeding out poor performers.  Coordinating the variety of retailers and aspects of their marketing allows shopping centres to be more attractive to consumers.

The bottom line is, shopping centre owners and shop owners have a common interest.  Retailers and landlords want to see heavy traffic in shoppers.  The businesses are trying to please the customer.  Strong commercial rivalry between different shopping locations is the key to achieving this.

The only impediment to prices, rents and conditions that adequately reward all parties is the presence of some monopoly conditions.

The PC suggests that zoning and planning regulations operate against the consumer's interest by creating restrictions to competition.

Comparisons with shopping spaces elsewhere suggest that regulatory restrictions have left Victorians underprovided.  The solution to this is in the hands of government.

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