Retail Dude

With slowdown in growth and Real Estate slump, many of modern retailers are resorting to rent renegotiation as a measure to reduce and control cost (fixed). Rent contributes to a major portion of a Retailers Fixed cost. As supply in Real Estate is exceeding demand, retailers finding it a good opportunity to renegotiate and reduce rents, which in turn will again contribute to the Real Estate slump. Retail majors like Future Group, Reliance Retail and Aditya Birla Group are renegotiating rent and they think that it is a part of long overdue correction in Real Estate sector. They have purchased or leased properties in peak periods for much more price than worth. Renegotiating rent will help them to reduce their cost by 20-30%.

Retailers are negotiating rent between 10% - 35% and even 40% in some cases and have determined that if rents are not reduced, they may relocate. For Future Group, rent accounts to 6% of sales which it intends to reduce by a percentage. Whereas Vishal Retail has been able to renegotiate rent for 500000 sqft of property for past three months. They have renegotiated rent by 20-25% and are saving Rs. 30 lakh per month.

- Rajeev Damani

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