Productivity Commission

Retail tenancy leases in Australia

Inquiry report

This inquiry report was released on 27 August 2008.

Download the report

Government response

  • Key points
  • Contents
  • The market for retail tenancies is dynamic and complex. It is an amalgam of large and small businesses participating as landlords and tenants.
    • There are around 290 000 retail tenancy leases in Australia with up to 58 000 written each year.
    • About one fifth of leases are in shopping centres with the remainder in retail shopping strips and other retail formats.
  • Retail tenancy leases - legally binding documents that define the relationship between the landlord and tenant - are governed by State and Territory retail tenancy legislation.
  • The main intention of specific retail tenancy legislation is to address bargaining imbalances between large shopping centre landlords and small retailers.
    • The legislation is highly prescriptive and has grown in volume - now amounting to some 700 pages across jurisdictions.
    • Significant and widening differences between jurisdictions persist, despite attempts at harmonisation.
    • Aspects of the legislation have constrained the market, lowered productivity and added to compliance and administrative costs.
  • Nevertheless, a number of innovations appear to have been useful, in particular:
    • simple, low cost and accessible dispute resolution
    • disclosure statements
    • lease information
    • the encouragement of registration of leases in some jurisdictions.
  • In an environment where the market is working reasonably well overall, further attempts to prescribe lease terms and conditions would not improve outcomes.
  • The Commission considers the most fruitful approach to improving the operation of the retail tenancy market and reducing costs would be to:
    • further improve transparency, disclosure and dispute resolution, to reduce information imbalances and unwind constraints on efficient decision making
    • reduce the prescriptiveness of legislation and move to a nationally consistent retail lease framework, to increase efficiency and reduce costs
    • adopt a more focused approach to the shopping centre segment of the market, through the introduction of a national shopping centre code of conduct, to ease tensions and reduce costs in that segment and to support the move to less prescriptive legislation and national consistency.
  • In addition, the potential to relax planning and zoning controls that limit competition and restrict retail space and its utilisation warrants further examination.
  • Chapter Preliminaries
    • Cover, Copyright, Ministerial letter, Terms of reference, Contents, Abbreviations and explanations
  • Overview
  • Chapter 1 Introduction
    • 1.1 Background and recent regulatory developments
    • 1.2 Recognising constraints on economic efficiency in retail tenancy
    • 1.3 Relation to other inquiries
    • 1.4 Study procedures
    • 1.5 Structure of the report
  • Chapter 2 Market for retail tenancy leases
    • 2.1 Scope of the market
    • 2.2 Provision and use of retail space
    • 2.3 Market entry, exit and vacancies
    • 2.4 Summing up
  • Chapter 3 The regulatory environment governing retail tenancies
    • 3.1 Origins of retail tenancy legislation and regulation
    • 3.2 The nature of legislative and other responses
    • 3.3 Zoning and planning
    • 3.4 Summing up
  • Chapter 4 Dispute resolution
    • 4.1 Development of dispute resolution procedures
    • 4.2 Current dispute resolution procedures
    • 4.3 Summing up
  • Chapter 5 Principles for regulation of the retail tenancy market
    • 5.1 Views on effectiveness of retail tenancy regulation
    • 5.2 Designing good regulation
    • 5.3 Considerations for intervening in retail tenancies
    • 5.4 Proposed principles
    • 5.5 Summing up
  • Chapter 6 Security of tenure
    • 6.1 Participants' views
    • 6.2 Evidence on lack of security
    • 6.3 Assessing the case for change
    • 6.4 Summing up
  • Chapter 7 Occupancy costs
    • 7.1 Participants' views
    • 7.2 Evidence on occupancy costs
    • 7.3 Assessing the case for change
    • 7.4 Summing up
  • Chapter 8 Market information, transparency and disclosure
    • 8.1 Participants' views
    • 8.2 Evidence on information failure
    • 8.3 Assessing the case for change
    • 8.4 Summing up
  • Chapter 9 Business conduct and dispute resolution
    • 9.1 Participants' views
    • 9.2 Evidence on the incidence and nature of disputes
    • 9.3 Concerns about business conduct
    • 9.4 Assessing the case for change
    • 9.5 Summing up
  • Chapter 10 Assessment and alternative approaches to regulation
    • 10.1 Views on aspects of regulation that hamper market operation
    • 10.2 Main features of an alternative approach
    • 10.3 Summing up
  • Chapter 11 The Commission's recommendations
    • 11.1 The scope for regulatory improvement
    • 11.2 Actions to improve the operation of the retail tenancy market
    • 11.3 Implementation, adjustment issues and impacts
  • Appendix A - Consultation
  • References
  • Extension of the reporting date letter

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Productivity Commission acknowledges the Traditional Custodians of the land on which we live and work, and we pay our respects to Elders past and present.

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