Retail Excellence Ireland insists that the Fine Gael/Labour government’s decision to renege on commitments to tackle the two-tier rent system in Ireland will lead to the closure of stores around the country and the loss of countless jobs in the coming months.
The group estimate that up to a third of stores may have to close following the government’s controversial decision.
Hundreds of retailers around the country delayed closing down businesses in the expectation that a change in legislation would bring in market rate rents.
Now they say they have no option but to close outlets and cut jobs in locations where rent is too high and landlords, many under pressure from their own bankers, insist on maintaining rents at levels set during the boom.
Minister for Finane Michael Noonan and Minister for Justice Alan Shatter said abolishing existing upward-only rents would not survive a constitutional challenge.
Stunned retailers, who were promised change are said to be up in arms at the decision, blaming the National Asset Management Agency for derailing the decision.
Many potential investors interested in NAMA’s Irish property had been holding off striking deals fearing leases would be revoked.
Brendan McDonagh, chief executive of NAMA, had warned that changes could cut up to 20% off property values, therefore devaluing the bad bank’s property portfolio by about €2bn.
In his Budget speech Mr Noonan promised the publication of guidelines on how NAMA – now the country’s biggest landlord – approves rent reductions for struggling retailers.
David Fitzsimons, chief executive of Retail Excellence Ireland said: “The minister’s suggestion that NAMA guidelines on commercial rent reductions will improve the lot of retailers is nonsense. If NAMA had any intention of engaging with retailers, why are guidelines only being published now? The minister is effectively leaving all tenants in non-NAMA properties to the wolves.
“Additionally, private landlord companies and pension funds will be left to sit on their hands and maintain Celtic Tiger era rents. Minister Shatter has lost the respect of Ireland’s largest industry – retail.”
“The retail industry has lost 50,000 jobs in the past four years. The continuance of upward only rent reviews will greatly increase this number. The Government has lied to every commercial tenant and retail employee in the country.
“The evidence is clear; landlords have no interest in reducing rents. The last three years have seen average rent reductions of only 3.83% while sales levels fell by 30%,” said Mr Fitzsimons.
One retailer who spoke to The Sunday Independent said he took out his lease at the height of the boom and was now paying nearly €130,000 a year in rent for a building only valued at €400,000.