Last Updated on Sunday, 24 May, 2020 at 7:50 pm by Andre Camilleri
The Association of Catering Establishment (ACE) calls on Government to regulate commercial rent for catering establishments retrospectively from 1 March 2020.
The majority of landlords continue to charge rents as if there is no crisis, and restaurants are unable to sustain this. If rent is not regulated, Government efforts and the sacrifices of both business enterprises and employees will not continue to sustain pre-pandemic employment levels, as has been achieved somewhat successfully over the last two months.
Restaurants have been reporting revenues equivalent to 10% of previous levels, which can far from absorb let alone sustain the “business as usual” scenario rents being charged. As such, rental expenses are peaking to at least 50% of turnover. The rental market flourished in the recent years as a result of positive economic growth, however these cannot be justifiably retained at the same levels amidst a downturn which is both evident and may unfortunately persist into the foreseeable future.
Rent will be the main cause of bankruptcy and insolvency for restaurants if it is not regulated. All efforts being made by restaurants to increase their liquidity and control the more variable cost components of their operations will prove futile if they continue to be charged unwavered rental rates.
The reality being imposed by a number of commercial landlords appears to be short-sighted, particularly noting that the discontinuation of a number of restaurant operations in the short-term will only result in an increase in supply which will continue to pressure rates downwards.
Landlords have resisted reacting naturally to the commercial situation being observed, and we believe that it is now time for Government to step in.
In recent months, the ACE had called on Government to consider offering tax exemptions to landlords who reduce their commercial rent by 50%, however this has not as yet been announced as a measure which Government has included in their aid packages, despite the increasingly evident need for downward pressures to be placed on rental rates.
Tax incentives are no longer sufficient to remedy the situation. Rental rates must be regulated to the granularity of the size and location of an operation, with a price per square metre per annum being established. These parameters have in the past been defined for income tax purposes, indicating that the required data set to effect this regulatory change may already be available.
The ACE has been collaborative with all stakeholders in the past, and resounds Government sentiment that a degree of burden must be borne by all. Government has initiated change. Employers in the catering industry have done their part. Only a few landlords have reacted.
Government must regulate a maximum rent per square metre as a COVID-19 emergency law. It should also lead by example and waive all rents on Government Land.