As commercial property lease rates continue their dramatic decline, more and more owners are making deals with store operators whereby, rather than the latter paying a fixed monthly rent, the landlords collect an agreed share of the business revenues, as is also the case at shopping malls.
Such agreements, which have also been reached with major retail chains such as Jumbo and H&M in recent months, generally provide for the payment of between 5 and 10 percent of the store’s monthly turnover.
Estate agents are further reporting a similar rise in contracts for retail stores which provide for neither rent payments nor a share of the revenues for the landlord. A number of store owners in the center of Athens – though not in the most popular shopping streets – have opted to lease out their property in this way as long as the tenant agrees to maintain the property, repair any damage and pay all its expenses, including utility bills and property taxes. While this option may appear extreme, it illustrates the extent of the crisis for this category of properties.
For months now, the representatives of property owners and other institutional entities in the market have been stressing the need for an easing of the tax burden on properties that fetch no revenues, particularly on the properties that have been empty for a long time. For the latter, they have proposed a 40 to 50 percent reduction in the tax rate compared to those with tenants.
When one considers the tax on revenues from property rentals and the usual rent payment delays that can stretch to many months due to the crisis, it becomes clear that only a very small amount of a leased commercial property’s total revenues – about 25-30 percent – ends up in the owner’s pocket. Due to the drop in rates, that amount is increasingly negligible.
A recent survey conducted by Athinaiki Economiki, which represents international property consultants Jones Lange LaSalle in Greece, has shown that the total decline in professional rental rates for stores below the top-quality tier in Attica has reached 70 percent since 2008, while in the main commercial street in Athens, Ermou, rates have dropped by 41 percent.