Restaurants across Malta have been allowed to reopen, but with more protocols to follow and business slower than it used to be, commercial rent has become a more pressing problem.
The problem has become so acute that the Association of Catering Establishments has called on the government to regulate commercial rent for restaurants and to do this retroactively, starting from 1st March 2020.
“The majority of landlords continue to charge rents as if there is no crisis, and restaurants are unable to sustain this,” the ACE said. “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.”
The Association said restaurants have been reporting revenues equivalent to 10% of pre-pandemic levels, which means their rental expenses have peaked to at least 50% of their 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,” it said.
“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 non-wavered 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.”
The ACE had earlier urged the government to offer tax exemptions to landlords who reduce their commercial rent by 50%, but they said that the situation has aggravated so much that tax incentives are no longer sufficient.
“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,” it said. “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.”
Cover photo: A restaurant in Sliema opening its doors earlier this week