Gerry Harvey says current retail rent structure unsustainable
Gerry Harvey, the executive chairman of the Harvey Norman retail chain, has questioned the sustainability of existing retail lease structures with inbuilt annual rent increases of 4% to 5% plus regular market reviews.
Rents currently could take 15% to 20%, and in some instances 30% to 40%, of retailers' turnover, he has suggested.
Harvey says shopping centres that charged the highest rents faced the most risk of having to take cuts.
Bulky goods centres, by comparison, which rent space at about $200 a square metre are better placed, Havey says.
"You are going to see retailers closing down more than you see them opening up… And that is going to have a big influence on rents and the valuation of shopping centres," Harvey says.
The fundamental problem was that Australia had too much retail space which would suggest not many more new shopping centres would be built.
"We have come to a halt,” he told The Australian property reporter Florence Chong.
“It is very difficult to justify the cost of building today because of the high cost of land and construction."
