Companies fighting for 20% discount on rental fees

“We launched negotiations related to the rent we pay for several stores. They are no longer profitable. We aim to lower rental costs by 10 percent in the coming two-three months,” the CEO of Domo household appliance retailer, Lorand Szarvadi, told Business Standard.

Rental fees are among the largest operating costs for a retailer, along with salaries, and can amount to 8 percent of the sales of large players.

The President of another retailer, Flamingo, Dragos Simion, said the company is negotiating fees for all its rented commercial areas, but success depends on how realistic owner expectations are.

“Pressure by retailers to renegotiate rental fees is felt on the market, in terms of contracts already signed in malls. This is natural, given daily cash-flow of retailers is affected,” DTZ Echinox consulting company official Oana Iliescu said. Retailers are not the only companies trying to lower rental costs. Telecom operator Vodafone and Edipresse publishing house are other examples. According to the Managing Director of Edipresse AS Romania, Cristina Simion, the company has not renegotiated rental fees so far, but is trying to do so.

“Rental fees were determined for turnover and profit that are no longer viable, so negotiation is in the best interest of both parties. We hope to save at least 20 percent,” she said.

The CEO of Vodafone, Liliana Solomon, recently said, “that the fact that there will be a pressure on turnover will make us analyze costs, but we are trying to improve certain processes, maybe analyzing rental fees, and determining whether we want to further increase the number of stores as previously planned.”

A new trend that is already visible in terms of retailers is that they are foregoing street shops and relocating to malls. “This has also been noticed for household appliance retailers,” Iliescu added.

Contracts for street shops are generally more flexible and permissive, allowing companies to relocate without serious repercussions. However, prices are higher, especially for shopping areas in city centers or high-end streets.

However, although cheaper rental contracts for mall shopping areas are tougher, these are concluded for at least five years, and do not allow retailers to break the contract prior to term.

Meanwhile, rental prices did not rise, as opposed to the previous years. On the contrary, they are idle compared to 2008 or even slightly lower. For street shops, rental fees amount to €22-55 per square meter, according to representatives of Coldwell Banker Affiliates of Romania consulting company.