7 Occupancy costs (PDF - 106 Kb) - Productivity Commission

through other means, it is not clear that prohibiting the provision of turnover data
(or legislating the fashion in which it is provided) would materially affect
occupancy costs. The Commission’s assessment is that the provision of turnover
data, and its use by landlords should be the subject of commercial negotiation
between the parties to a lease.
FINDING
Prohibiting the reporting of turnover data would be unlikely to lower average
occupancy costs.
Regulating shopping centre fit-outs
A number of participants suggested that regulations governing shopping centre fitouts
be established. Suggestions included controls on what landlords can request
and caps on fit-out costs. One frequently suggested option was to mandate
competitive bidding for fit-outs by prohibiting landlords requiring that tenants use a
particular group of builders, architects and suppliers (sometimes in-house). What
landlords can request of tenants in terms of fit-outs was also perceived as a
particular issue for franchisees as it was felt that brand recognition was limited by
some fit-out requirements.
Prohibiting landlords from stipulating who can provide a fit-out for a retailer, and
under what conditions, is likely to introduce greater competition into fit-out
contracts. As long as fit-outs are consistent with a shopping centre’s design and
relevant building and labour market regulations, it is reasonable to contend that the
use of alternative builders, architects and suppliers to those recommended by the
landlord may lower the costs faced by retailers. The achievement of lower fit-out
costs could lead to a number of advantages, including:
• a greater ability for tenants to amortise the cost of the fit-out over their fixed
lease period;
• lower set-up costs and thus the potential for lower debts or levels of personal
guarantees for individual retailers; and
• due to lower costs, a potential for lower prices to consumers and/or higher rental
returns to landlords.
But fit-out activity, as with any other construction, can be highly disruptive. Thus,
landlords may legitimately seek to minimise these disruptions through mandating
that tenants use preferred suppliers with, in their judgement, proven qualities and
familiarity with the centre. Also, for those shopping centre-wide systems, such as
security alarm systems, maintenance/installation by the nominated contractor may
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