When looking to invest in commercial real estate, setting the right rent for prospective tenants can be confusing.
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Long-time Wollongong business broker Enzo Conti regards rent as one of the key factors which can secure a great tenant and a long lease, or the opposite.
However, some landlords may wrongly assume commercial rents would be in the same calibre as residential rents, therefore ask too much and are left with an empty shop-front for months.
"The residential leasing market at the moment is still quite good. commercial leasing has dropped," Mr Conti said. "Whether people want to go out to eat or go out to buy ... that's optional. They've definitely got to feed themselves and have got to pay their [residential] rent."
Mr Conti said a business's success also relied on the operator, as he could negotiate "attractive terms and conditions" for a good business though a bad operator could "destroy it".
"If terms and conditions are right for a retail lease and the operator ... they will do well ... but a good operator will know what terms and conditions they need for that business to succeed," he said.
Mr Conti said in the present climate he's needing to negotiate with landlords to drop their rent to ensure their investments are tenanted with longer leases. He said it's the toughest conditions for businesses he has seen in 21 years, but doesn't believe it's all doom and gloom.
"The market is down. people are scared, I'm not seeing much money around at the moment," he said. "It's like the confidence is low [in the economy] and in order to get deals over the line we've got to do very, very attractive conditions to get them over the line."
It's no secret the retail market is not doing as well as previous years with many empty shopfronts seen in Wollongong CBD and in shopping hubs around the region.
Last week the National Australia Bank's chief economist Alan Oster declared the industry was "clearly in recession".
"This suggests that the consumer remains highly cautious with anything but spending on essentials because of ongoing slow income growth, high debt levels and possibly some concerns over falling house prices," he said.
In the NAB Monthly Business Survey for May, Mr Oster says while the retail industry has lagged the other sectors for some time, "the recent deterioration has seen conditions in the industry fall to levels not seen since the GFC".
The most recent retail sales data from the Australian Bureau of Statistics for April, showing retail trade fell by 0.1 per cent, after a 0.3 per cent increase in March and 0.8 per cent lift in February.
Give your approval, not necessarily to the highest bidder, but the applicant that stands out as organised, motivated and with a business idea that you can see your suburb will support.
- Business operator Angus Nicol
In recent times months increasing rents have been blamed by some popular eateries for the deciding factor to close their doors.
Founder of Black Market Roasters Angus Nicol is currently selling his Thirroul outlet to focus on commercial supply rather than retail, but attested to landlords in the region often asking for unrealistic amounts.
"Understanding the maximum rent to revenue ratio (how much rent your business can afford given your offering) and ensuring tenants are given a balanced lease, gives both parties opportunity to pursue ongoing profit," he said.
"If independent operators can flourish, so will the high street retail commercial investment category. Landlords need to share the risks to operators and have a more sustainable outlook for their returns, otherwise both my go under."
Mr Nicol's message to landlords in the region was to not always choose the highest bidder, "but the applicant that stands out as organised, motivated and with a business idea that you can see your suburb will support".