The Hindu Business Line : Retailers rejoice over falling rentals

Chennai, Dec. 9 With fall in prices of real estate and consequently of rentals, retailers are renegotiating their deals with landlords. Where the landlords are not relenting, they are shifting the shops to other locations.

Mr R. Subramanian, Managing Director of the discount retail chain Subhiksha, says the company has already initiated steps to renegotiate with its landlords across the country for reduction in the rent.

“Over 20 per cent of our properties would get renegotiated in the next 60 days,” he says.

The retail chain has 1,590 stores across the country, which sell mainly grocery and mobile phones. Subhiksha had expressed its intent to enter retailing of consumer durables, but Mr Subramanian recently said the plans would rather wait until the real estate prices settle.

Property (rent) consumes at least 5-6 per cent of the shop’s turnover, sources in the industry say. Usually, the rent contracts are for 10-12 year periods.

Retail major Reliance Retail is also working on similar lines across the country. “Negotiations are on and we hope to settle down for anywhere between 25-30 per cent lower rent,” says Mr M. Balachandran, Chief Mentor, Reliance Retail.

According to Mr S. Jagdish, Chief Operating Officer (Retail) of the Hyderabad-based Heritage Foods Ltd, almost 25 per cent reduction in rent is expected.

“We insist on at least 25 per cent cut in the rent, which I do not think is difficult to get,” he said. Asked what if it is not agreeable to the landlord, he said, “We will relocate.”

Heritage runs a chain of 75 stores across Tamil Nadu, Andhra Pradesh and Karnataka under the brand ‘Fresh@’.

Earlier, it was planning to take the total number of stores to 100 by the end of the year. But, owing to “exorbitant real estate prices” the company has put the brakes on its expansion plans.

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