Zoning laws hand too much power to shopping centre landlords: Productivity Commission

27 August 2008

Todays Productivity Commission report hammers home the fact that town planning laws are restricting retail competition, according to Aaron Gadiel, chief executive of the Urban Taskforce.

The Federal Governments independent economic advisor, the Productivity Commission, today released its inquiry report into The Market for Retail Tenancy Leases in Australia The report reveals that small retail tenants face an uphill battle in negotiating with oligopolistic shopping centre landlords.


Earlier this month the Australian Competition and Consumer Commission handed down its verdict on town planning laws – now we have the verdict of a second major inquiry by a federal watchdog, Mr Gadiel said.


We welcome the Productivity Commissions finding that planning controls should be relaxed to boost opportunities for competition and more retail space.


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.


The Commission has belled the cat by publicly declaring that ˜owners of retail concentrations such as shopping centres compete in an oligopolistic fashion with other landlords.


This is a blunt, but accurate assessment of the state of competition between retail landlords at the moment.


The biggest single culprit for this situation is undoubtedly the highly restrictive town planning laws in place across Australia.


The Commission also 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 planning laws in each state have been stopping new retail precincts from being developed to serve local communities.


In response to the Productivity Commissions findings the Federal Governments official statement, released today, says:


The Commonwealth considers that unwarranted restrictions resulting from some planning and zoning regulations can influence the quantity and location of retail space available and therefore competition in the retail market …Improvements to competition will not only improve the landlord-tenant relationship in shopping centres, but may also have positive flow-on effects for consumers through greater choice and lower product prices.


We congratulate the Federal Government on its response, Mr Gadiel said.


We look forward to this matter being discussed at the Council for Australian Governments.


The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.



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