It’s just pure bad luck that our annual rent increase falls in January, says John Kreeft, who runs two branches of their women’s boutique Style by Suus with his wife in Zeeland. Because if you do the sum that fits the annual inflation correction, the rent could soon go up by more than 10 percent.
Kreeft has no major concerns for the establishment in Zierikzee. That landlord was flexible in corona time and is always very careful with rent increases. But for the shop in the seaside resort of Renesse, things may turn out differently.
There Style by Suus receives the maximum rent increase every year. Now that was nothing to worry about for a long time, but that’s different now. And the Zeeland clothing store is not alone in this, says business broker Marije Brinkman. ‘We receive a lot of calls from both tenants and landlords who find it unbelievable that rents can make such a big jump. But yes, it is the reality after all.’
How is that possible? Most leases for retail and commercial real estate contain a stipulation that inflation is included in the annual rent increase. This is done on the basis of the Consumer Price Index of Statistics Netherlands (CBS). This index shows the increase in prices of all kinds of products, including those of gas and electricity. Based on a small calculation, that inflation percentage can largely be implemented in the month in which a lease was signed. Brinkman: ‘Nobody ever worried about that contract provision, because inflation was very low for a long time.’
From fish store to garage
Six months ago, trade unions such as MKB Nederland and InRetail retailer’s association already realized that many members were facing a significant rent jump. This is also in addition to a possible repayment of corona support, higher purchase prices and rapidly rising energy costs. They actually pay that energy bill twice. Not only to the energy company, but indirectly also in the form of a significantly higher rent. The ‘urgent appeal’ was therefore made to property owners to please limit the rent increase to ‘core inflation’. That is to say: do not include ‘energy inflation’ and you can reduce the rent increase considerably.
The signatories include jewelers and garage owners, but also butchers and fishmongers. Director Janneke Keuning of the association of fish specialists VNV: ‘Our refrigeration makes us an energy-intensive industry. So we suffer a lot from energy costs. Many of our members are discussing the rent increase with their landlord.’
This applies, for example, to a fish specialist in Rotterdam. He wants to remain anonymous because of the fragile relationship with his landlord, but did protest against a rent increase of about 10 percent on his monthly rent of approximately 3,000 euros. He is again making a hole in his revenue model, he says. Moreover, such a large rent increase will continue for years to come. So he may close on Mondays and Tuesdays to cut costs, in the hopes that his customers will continue to buy the same amount of fish on the remaining four days.
Lively shopping street
It is all becoming more and more difficult for shopkeepers, says Ton Kroeze, owner of two jewelery stores in The Hague, where he is also active in a number of business associations. “A large number of shopkeepers still have to make up for debts from the corona time, from the tax authorities and the bank to the government. At the same time, costs are rising and customers are becoming increasingly cautious about their spending. So many retailers are now asking their landlords to look at the common good. Don’t we all want lively shopping areas in which a very diverse range of shops can survive?’
In new leases, passing on inflation is often limited, says broker Brinkman. ‘Just like in the past, an upper limit of, for example, 5 percent will be agreed. But for the time being, much is still being negotiated about the current conditions. You have landlords who simply implement the increase. These are often the larger parties behind which investors are more distant from the tenants. Others want to limit the increase. These are often the smaller investors, who can simply decide for themselves how to deal with their tenants.’
leniency
Landlords naturally also have higher costs, for example for maintaining their properties, renovating a shopping center or refinancing their loans. They believe that tenants have nothing to complain about with the moderate inflation of 1.66 percent on average over the past ten years. This applies in particular to supermarkets, for example. Large shop owners such as Syntrus Achmea do not want to moderate their contractually agreed rent increases, barring exceptions. We will maintain that line, confirms Wereldhave, owner of eleven shopping centers in the Netherlands.
Daan Blankendaal, of cheese specialist Kaas van Daan in Alkmaar, is satisfied for the time being. Many of the smaller, private landlords in his neighborhood waive maximum rent increases. ‘They look more at the entrepreneurial person than the large real estate companies. So they are also a bit more lenient with the rent.’