John Corcoran, lobbyist and campaigner for real "market rents" for Irish commercial property tenants, has erected another and this time a final banner above his shoe shop at number 47 Grafton Street in Dublin. John has been leading the charge against the imposition of what he refers to as "Feudal Leases" in Ireland still, despite the previous government banning such outrageous clauses in all future commercial lease contracts going forward, effective from March 2010 onward. Unfortunately, virtually all commercial tenants in Ireland signed contracts before this date so are trapped in their existing lease structures which incorporate the now infamous "Rental Ratchet" (or more commonly referred to as Upward-Only Rent Reviews or UORR). This ratchet means that rents only ever rise or stay the same (although the latter was virtually unheard of until recently). A direct consequence of this, is that, those leases that experienced super-normal rent rises during the universally acknowledged Irish property bubble era (recent estimates suggest that average Dublin retail rents for instance, were ratcheted up +270% in the decade from 1996-2006, whilst the general price level or CPI inflation rose by an accumulated +30%, over the same time period, leaving a spurious legacy of boom time rents today during a period of unprecedented austerity. Meanwhile many Irish firms continue to go to the wall, because they can adjust wages & salaries, but not one of their biggest costs, namely; rent.
For many tenants in the Irish Retail Sector, rent is often greater than salaries e.g. the 900 square foot Korky's shoe shop in Grafton Street has to pay just under half a million euros annually in rents plus rates (445k rent + 50k rates to DCC), equivalent to the salaries of 15 x shop workers, whereas in fact this store employs just 5 staff, therefore rent is 3x more than the gross wages & employers taxes. In total, John employs more than 50 staff across 6 stores in Dublin and Cork.
Next month, in May, John will appear in front of the High Court in his legal challenge to the excessive rent demanded by his landlord Canada Life Assurance, who in 2005 ratcheted-up his annual rent from 211,000 euros to 445,000 euros per annum. That's right, they more than doubled it. Why? Because they thought they could get away with it at the time. If John loses his case, the consequences will be dire for all 50 employees. He does not wish to end up like Ken and Ben Peat who were forced recently to close all of their stores and enter into examinership, effectively ending a family business. This is why John is fighting the good fight, so vigorously.
There are many small to medium sized enterprises (SMEs) out there who are presently fighting to survive and retain their staff, who are also resisting the imposition of excessive rental demands, especially from 'Institutional' landlords. It has to be said, there is a world of difference between the private or professional (often family-run) landlords, who have assisted their tenants by lowering rents, in some cases by as much as one-third, so these smaller landlords are really not the problem. They are also more active in terms of running their shopping centres, industrial estates or office buildings and are consequently less likely to rely on the services of the big firms of Chartered Surveyors. On the other hand the large institutional landlords (e.g. Insurance Companies, Pension Funds and Life Funds) do rely upon the "professional experts" who got the Boom-Bust so badly wrong, and they pay these guys handsomely for their services. Thus the 'vested-interest' parties (including their buddies in the news print media, many of whom are also landlords in their own personal capacity), resist lobbyists for justice like John (who has real skin in the game) so vehemently. Their over-inflated egos & salaries are on the line here.
However, there is a bigger picture 'national' issue here at stake, and that is one of competitiveness, both internationally and domestically. Think about it not just in employment terms (even though the Retail & Distributive Trades Sector employs 281,000 people, as big today as the Construction Sector was during the halcyon days of the property bubble), but in terms of what you the 'Consumer' have to pay for all goods and services. All of the firms and individuals that you interact with on a day-to-day basis, whether it is a tradesman, shopkeeper, office worker etc., and do business with, will have to charge you more for their products and services, just to pay their higher rents. Accordingly, it is you the consumer, who ultimately pays the price for excessive rents (or you pay through less choice as your local business disappears).