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Shopping centres given a new 'lease' of life
Posted: 25/11/2009
Many Australian shopping centres rely on major 'anchor tenants', such as Woolworths and Coles to draw customers to their centre and to attact other retailers as tenants.
Major anchor tenants are aware of their value to shopping centres. In return, they often seek long term leases with restrictive covenants which effectively prevent or deter landlords from leasing space to competitors in the same centre. If a competitor enters the same shopping centre as a major anchor tenant, the leases often entitle the anchor tenant to significant rental concessions from the landlord. In other cases, leases grant the major tenant a first or last right of refusal to lease any premises within the centre that the landlord proposes to lease to a competitor.
For Coles and Woolworths' competitors, including Aldi and IGA, this became a major barrier to them securing leaseholds within shopping centres.
However, recent intervention by the ACCC potentially opens up the grocery sector to greater competition within shopping centres.
After the ACCC threatened to take legal action against Coles and Woolworths for anti-competitive conduct under the Trade Practices Act, the ACCC received court enforceable undertakings from Coles and Woolworths that, among other things, provide that Coles and Woolworths will no longer include restrictive covenants in new leases, nor seek to enforce such covenants in existing leases that have been in place for more than 5 years. The undertakings took effect from 17 September 2009.
Shopping centre landlords, major anchor tenants and competing retailers, should review their current and future leasing arrangements to take account of these developments.
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