Landlords are asking for up to 15% in turnover rent, according to Spero Panagakis, co-founder of BB Social Dining
Landlords in Dubai are demanding F&B tenants to pay the “highest price possible” for rent, as well as up to 15 percent in turnover rent, according to the co-founder of DIFC restaurant BB Social Dining.
Speaking to Arabian Business, Spero Panagakis said landlords are also requesting F&B outlets to submit quarterly cheques in advance, which results in tight cash flow.
“Landlords need to be more flexible with their tenants and should be working together to support the communities. They are still striving for the highest price possible…We are one of the only regions in the world still paying by cheque and also paying quarterly in advance, which puts too much pressure on cash flow,” he said.
“Whilst turnover rent is becoming the norm in Dubai, high percentages such as 15 percent are requested from certain landlords. I could understand that if the landlord wants to fund the project and that supports his return, yet still these numbers have never created any positive results for any type of business,” Panagakis added.
While landlords are starting to adjust rent prices and cash flow expectations, they need to make more adjustments, the co-founder said, as they continue to offer tenants a “very short” three-month fit out period, after which “severe” penalties apply.
“This is barely achievable and puts unnecessary pressure on the tenant, who will then impose that on to the main contractor,” he said.
BB, which is derived from the Arabic word ‘habibi’, serves a Far Eastern menu and is stretched over three floors. Panagakis, who is one of three owners, looks after restaurant operations, while co-owner Shab Stumpf looks after business development. The third owner, Alex Stumpf, is BB’s current chef and the former head chef for closed DIFC restaurant Peyote.
In January, Bulldozer Group managing partner Evgeny Kuzin said some developers in Dubai provide new restaurants with false or inaccurate footfall numbers, leading them to shut down soon after opening.
He said restaurants end up paying high rent and receiving little visitors.
“Of course there are issues in the market like everywhere. [Some] developers are concentrating a lot on building developments around F&B. They are selling space at high prices to new tenants who come to town with no experience,” he said.
“They sell them the dream and convince them that footfall is going to be amazing; that they should expect 35 million visitors over the year. And then the restaurant opens and nobody comes,” Kuzin added.For all the latest travel news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.