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Are grocery store lease terms increasing the cost of food?
Recently commercial real estate firm CBRE posed that question following a report from the Competition Bureau which confirmed that food costs are on the rise and significant changes may be required to bring grocery prices back down to earth.
“One unexpected idea floated by the Competition Bureau is to ban clauses in commercial leases that stop landlords from having competing uses or similar tenants at a property or in the surrounding area,” said the CBRE.
“Exclusive use clauses, known as restricted covenants in leases, effectively make it impossible for landlords to allow rival stores to open up near one of Canada’s Big 5 grocery chains (Loblaws, Metro, Sobeys, Walmart, Costco), who control more than two-thirds of domestic grocery sales.
“Those lease clauses allow grocery stores, and other retailers, to ensure that their investments are safe from excessive competition.”
Matthew Jackson, Vice-President with CBRE’s National Retail Group, said every retailer, not just grocery stores, likely has a clause barring a similar use from the property where they are located.
“I personally think looking at the Competition Bureau and talking about the lease terms, I just don’t think that should be the specific focus. It’s not just in the real estate,” he said.
“What I understand the government basically is just saying if they’re able to take away the restrictive covenants within a lease in a centre and prohibit any restrictions going forward on a property, if a grocery store leaves, then it would allow new groceries to go on, other smaller deli’s, bakeries and other types of retailers to go into the centre.
“From what I understand what they’re saying, if we take the control away from the top five then there will be more competition. From reading the articles it says...