Madam, – Ann Hargaden, Lisney director, states that the new Government’s proposal to remove the upwards-only rent review clause in existing leases “has unfortunately led to a great deal of misinformation (or, at the very least, many ill-conceived arguments) being, presented through the media” (Commercial Property, March 9th).
Unfortunately for Ms Hargaden it appears she is victim to “ ill-conceived arguments“ when she states, “If rent accounts for 5-10 per cent of a given business’ turnover (as is typical in most sectors) then a 20 per cent increase in rent is equivalent to a 2-4 per cent increase in their overall cost base”. Ms Hargaden in her own example has confused turnover with cost base. She goes on to be guilty of her own “misinformation” when she states “the vast majority (of tenants) will have had a break option since the downturn commenced or will have one over the next couple of years”. If this were true, retailers in Ireland would not require a change in the law and would not have lobbied so hard and long for such a change.
In summing up she states “the outcome of the recent election was a clear message from the people on matters such as these”. As both Fine Gael and Labour promised they would deal with this situation in their election manifestos, twisting this result to back up her argument is the icing on the cake.
An example of the “ludicrous” situation that one of our own retailers faces in Dublin’s Grafton Street is a shoe shop with a current yearly rent of €445,000 and only 1,000 sq ft on the ground floor. We shall use Ms Hargaden’s 5 per cent rental turnover ratio which implies a necessary €8.9 million yearly business. This equates to €741,000 turnover per month or €172,000 turnover a week and €24,600 a day. With the average shoe sale of €50 this store needs to sell 492 pairs of shoes a day, 49 pairs per hour or almost one pair a minute, 10 hours a day, seven days a week, 365 days a year. If this small shop was selling €2.50 burgers it would have to sell 20 burgers a minute or one every three seconds. Perhaps even vested interests might finally understand the necessity to bring lease law into line with business reality – and keep it there. – Yours, etc,