10 January 2011
Todays NSW Government proposal for tougher laws to protect small businesses from retail landlords is well-intentioned, but again overlooks the source of the problem, according to the Urban Taskforce. The government issued a draft of the Retail Leases Amendment Bill 2011 for public comment today.
The Urban Taskforces chief executive, Aaron Gadiel, said that the retail leases law was almost constantly being re-written, but nothing was being done to attack the reasons of the imbalance of power between big shopping centre landlords and smaller retailers.
In 2008, the Federal Governments independent economic advisor, the Productivity Commission, exposed the true cause of the problem, Mr Gadiel said.
The Productivity Commission report, The Market for Retail Tenancy Leases in Australia, detailed how town planning laws are restricting retail competition. It said that small retail tenants face an uphill battle in negotiating with oligopolistic shopping centre landlords.
The Productivity Commission found that zoning and planning controls can:
¢ limit competition and erode the efficient operation of the market for retail tenancies;
¢ give extra negotiating power to incumbent landlords and retail tenants;
¢ particularly advantage owners that have control over large amounts of retail space located some distance from competitors and their tenants; and
¢ disadvantage businesses that wish to gain access to additional space.
Town planning laws are the real culprit thats the reason that small businesses are in a weak position when they deal with their landlords, Mr Gadiel said.
These constant revisions of the Retail Leases Act will have no effect while town planning laws are unreformed.
The Productivity Commission said that planning controls should be relaxed to boost opportunities for competition and more retail space.
The Commission belled the cat by publicly declaring that owners of retail concentrations such as shopping centres compete in an oligopolistic fashion with other landlords, Mr Gadiel said.
This is a blunt, but accurate assessment of the state of competition between retail landlords at the moment.
The Productivity Commission found that some positive economic rents are extracted from consumers as the overall supply of retail space has been restricted.
This means that consumers are paying the price of restrictive planning laws, Mr Gadiel said.
The state government should stop fiddling at the edges and tackle the real cause of the problems.
The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.
