Rating Freo’s retail

COLIN NICHOL, who has a long retail and markets history, examines the latest development regarding vacant shops in Fremantle

THE announcement by Fremantle’s mayor that the city will consider charging doubling rates for property owners who keep their city premises empty rather than decrease rents, highlights once again the troubling matter of vacant premises in the city’s central area. Fremantle’s current CBD vacancy rate stands at about 15 per cent.

It is a puzzling conundrum that while shops are still emptying at an alarming rate around Australia and many parts of the world, Perth city is reported as leading the country (even “the world”!) with a 10 per cent increase in retail trade. But this is against a shop vacancy level of 10.8 per cent, the highest of any capital city in the country. It seems those still in business may have profited at the expense of others, partly due to a decrease in competition.

If that trend contains a logical thread, the more shops that close, the better for those surviving. That’s a frail hypothesis and not sustainable, when put against the requirement for variety, choice and competition in any shopping precinct. It seems more obvious that the common WA syndrome is in force: too many retailers for a small population too widely dispersed or, put obliquely, too low a population density.

What also comes to light is that high concentrations of retail survive best: big is better. Along with Perth city, major shopping centres are managing well, but again at a cost to others; smaller centres and suburban traders provide the counter-balance with their empty shop-fronts. Polarisation is a thread in metropolitan area retail and Sunday trading has exaggerated that. And then, turnover statistics are at best only a general guide when not all factors, increasing population and prices for instance, are factored in.

Would imposing a targeted differential rate cause landlords to reduce rents and tenant their shops, or is this just a distraction? If that is the stick, is there a carrot? Would council then reduce rates if landlords complied; what if they didn’t, what if they did and still kept the doors closed—and are there tenants to be had anyway? Rewarding may be better if they reform, while forcing them to upgrade their premises.

In England, business rates are not payable on properties for the first three months they are unoccupied, six in some cases, to provide an incentive to bring empty property back into use. Additionally, a business rates deferral scheme provides the option of spreading the increase in the 2012-13 bill over three years to help businesses manage cash flow during the downturn.

Suburban Melbourne council Moreland has introduced a local law that requires property owners or occupiers to maintain properties and prevent them from becoming unsightly. They have a differential rate for vacant land and unoccupied buildings, to encourage proper management, targeted directly at landowners who allow sites to deteriorate.

What will Fremantle council decide; is its proposition possible? Last word on all this from WA local government minister John Castrilli: “If a differential rate is imposed, all land within that zoning or use must be rated on the same rate in the dollar, which would mean all shops within that zoning—both open and closed—would be affected. A distinction can only be made if the land is vacant (ie, no building is erected).”

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