New price index lets companies compare their rents
BUSINESSES have welcomed the launch of a commercial lease price index, which should help them secure fairer rents – but warned that the Government must do more to open up the secretive commercial rent market.
The Commercial Lease Database, which was made public yesterday, provides for the first time an accurate picture of just how much Irish businesses are paying in rent. It is modelled on the house price register, but applies only to business leases.
The index reveals the cost of every commercial lease signed since 2010, when the Government started collecting this data. It should allow businesses to check how competitive their lease rates are in comparison to their peers.
Companies searching for new properties will be able to easily identify which parts of the country offer the most competitive prices or whether the quotes they are being given by landlords are in line with what their neighbours are paying.
"Until now, tenants had to try and collect proof themselves as to what the fair price of a lease should be. Now they have a common point of reference," said Dr Peter Stafford, director of industry body Property Industry Ireland.
He added: "Transparency is the bedrock of a sound and informed investment market."
The retail sector, which has been very vocal about the damaging effect of expensive leases, was particularly welcoming.
"Retailers up to now have had to negotiate leases without the full facts. With the information contained in the database, retailers will have a better idea of the market and can negotiate accordingly," said Retail Ireland director Stephen Lynam.
He added: "Since the end of the boom, total sales are down 25pc, while costs, including rents, remain stubbornly high. Today's news will at least bring transparency to what was a murky situation."
Dr Stafford pointed out that the commercial lease database did not make it easy to match addresses with their tenants. This meant that it would be difficult to make comparisons.
He added that the database did not provide a lot of crucial information about commercial leases, like the age of a building or its energy-efficiency rating.
The purchase price of commercial buildings is still clouded in secrecy too. This makes it difficult for tenants to compare how much their landlord paid for their building with what they are paying in rent – meaning that they can't establish what kind of profit landlords are making.
"The next logical step is a commercial property price index," said Dr Stafford.
He explained: "There's still a distance to go before we ensure that commercial lease deals are evidence-based and the market is stable."
Others warned that the database would only work if businesses actually supply the relevant information about their leases.
The organisation in charge of the database was forced to send out 8,000 letters recently to remind tenants who had missed the deadline for doing this.