Better to be friends than enemies

The ‘good times’, if indeed that’s what they were for Romania, are a distant memory now. At the Eurobuild CEE conference on the Romanian retail market, the hangover the sector is now suffering from was clearly apparent. There were, however, some rays of light for those taking a longer term view

One of the panellists commented that harassment of landlords by tenants now seemed to be a national sport, and it rang true. Not every retailer is in trouble, but from those who are trying to get rental reductions and other concessions from their landlords, you could easily form the impression that they are. When retailers hear that rents in one shopping centre are being reduced by 25 pct, they want rents reduced in their centre by the same margin, if not more, without considering (or caring) that conditions vary from centre to centre. As one panellist said, there seems to be no respect at all in the market. Another said he felt the retail market had moved from one period of imbalance to another period of imbalance, and it needed to settle somewhere between the two. At the conference, the unhappiness of the developers was apparent. Many had, after all, bought up several large plots of land at high prices before the crisis, and now their expansion plans have been put on hold, with downward pressure being exerted on rents in their existing schemes. This hurts. But, to invert a well-known idiom, one man’s poison is another man’s meat. According to one of the retailers represented, rents were not decreasing but “normalizing”. Relations between landlord and tenant are never ideal, but at present they are under enormous strain.

Also raised during the conference was the fact that the risk departments in some banks are now in the ascendant, and that they (often new faces not seen when the loan was negotiated) have a much tougher approach to the difficulties their clients find themselves in. Previously warm business relationships are taking a back seat to cold numbers. Many viewpoints were put forward and many voices heard, not only during the panel discussions but also during the breaks, and it was possible to discern a common sentiment emerging. This was that it is not in a company’s long-term interest to pursue a policy of naked self-interest at the expense of others – for example, by trying to invoke the ‘theory of unforeseeability’ to extract further concessions from the landlord, the theory being that if a contract becomes so imbalanced due to economic circumstances, then the damaged party (i.e. the tenant) can ask for court intervention to address the imbalance. To date this has not been invoked, but it is a sign of the times that it is even being threatened. On a more positive note, Ingo Nissen of shopping centre development company Sonae Sierra, gave an encouraging and thought-provoking presentation highlighting the positive effects of implementing energy saving and sustainable development measures in shopping centres, preferably at the design stage. Citing real-life examples taken from Sonae Sierra’s own development experiences, he revealed that savings of EUR 546,000 had been made on the construction of one of their centres by recycling 99.8 pct of the total waste generated, re-using 100 pct of the concrete waste from demolition work and 100 pct of the bituminous asphalt waste generated. On another centre, the installation of a groundwater and rainwater system at a cost of EUR 69,000 has provided annual savings of EUR 154,000, recouping the initial outlay within half a year. These measures, and many more, he said, generate long-term value. ν (RS)