IS RENT KILLING BUSINESSES IN TRINIDAD AND TOBAGO?<\/p>\n
Across Trinidad and Tobago, the pattern has become difficult to ignore.<\/p>\n
A business opens. A new sign goes up. Staff are hired. Stock arrives. Then, months or a few years later, the shutters come down.<\/p>\n
And increasingly, it is not only small operators disappearing.<\/p>\n
Major retailers have reduced their physical footprints, individual franchise locations have closed, and businesses that once appeared firmly established have reconsidered whether maintaining certain locations still makes financial sense.<\/p>\n
It raises an uncomfortable question: Is rent killing businesses in Trinidad and Tobago?<\/p>\n
The answer is more complicated than simply blaming landlords.<\/p>\n
Rent may not be the disease, but in an economy where revenues are under pressure and almost every other operating expense is increasing, rent can become the mechanism that turns a struggling location into an unsustainable one.<\/p>\n
THE COST THAT DOES NOT CARE ABOUT SALES<\/p>\n
A retailer can order less stock. Staff hours can sometimes be reduced. Electricity consumption can be managed. Marketing budgets can be cut.<\/p>\n
Rent is different.<\/p>\n
Whether a shop has its best month ever or barely gets customers through the door, the rent still becomes due.<\/p>\n
Commercial tenants can also face common area maintenance charges and other occupancy expenses, meaning the actual cost of occupying a location can be substantially higher than the headline rental figure.<\/p>\n
Consider a hypothetical 1,000-square-foot retail space renting for TT$25 per square foot monthly.<\/p>\n
That is TT$25,000 before additional occupancy expenses. Add TT$5,000 in common area maintenance and the cost reaches TT$30,000 before considering applicable taxes and other charges.<\/p>\n
If total occupancy expenses reach approximately TT$33,750 monthly, the business is spending TT$405,000 annually simply to occupy the space.<\/p>\n
At an occupancy-cost ratio of 10 per cent of sales, that business would need approximately TT$337,500 in monthly revenue, or more than TT$4 million annually, merely to keep occupancy around that benchmark.<\/p>\n
And that is revenue, not profit.<\/p>\n
The retailer still has to purchase stock, pay salaries, utilities, insurance, taxes, banking charges, security, advertising and countless other expenses.<\/p>\n
Suddenly, a shop that appears busy from the outside can be losing money.<\/p>\n
THE LANDLORD GETS PAID FIRST<\/p>\n
This exposes one of the fundamental differences between owning commercial property and operating the business inside it.<\/p>\n
The retailer assumes inventory risk.<\/p>\n
It assumes staffing risk.<\/p>\n
It deals with theft, damaged goods, foreign exchange shortages, changing consumer tastes, import expenses and declining customer spending.<\/p>\n
The property owner largely has one central expectation: collect the agreed rent.<\/p>\n
That does not make landlords villains. Commercial property carries its own financing, maintenance, taxation and investment risks.<\/p>\n
But rent occupies a privileged position in the business relationship.<\/p>\n
It is a fixed claim against revenue while profit is whatever remains afterwards.<\/p>\n
When economic growth is strong and consumers are spending, that arrangement can work comfortably for both sides.<\/p>\n
When sales stagnate, the difference becomes brutal.<\/p>\n
SAME BUSINESS, DIFFERENT RENT<\/p>\n
There is another reality rarely visible to customers walking through a shopping centre.<\/p>\n
Not every tenant is paying the same effective rate.<\/p>\n
Large anchor tenants can have enormous negotiating power because shopping centres need the traffic they generate.<\/p>\n
A small independent retailer may have considerably less leverage.<\/p>\n
Then there are businesses operating from property owned by their founders, shareholders or families.<\/p>\n
For them, rent may effectively remain within the same economic group, be substantially reduced or disappear as a conventional external expense altogether.<\/p>\n
A competing business selling almost identical products from rented premises could therefore begin every month thousands of dollars behind.<\/p>\n
The difference has nothing to do with which business has better products.<\/p>\n
It is structural.<\/p>\n
There are also franchise operators that own their properties, franchisors controlling head leases and businesses whose property holdings have become almost as important as their actual trading operations.<\/p>\n
Consequently, talking about “the rent” as though every business faces the same commercial reality can be misleading.<\/p>\n
Two shops can operate 100 metres apart and have completely different break-even points.<\/p>\n
RENT IS NOT ACTING ALONE<\/p>\n
The pressure becomes even more severe because rent is only one part of the equation.<\/p>\n
Businesses must contend with electricity, wages, taxation, duties, shipping, insurance, security and financing.<\/p>\n
For import-dependent businesses, foreign exchange availability creates another major problem.<\/p>\n
A retailer can have customers willing to buy and still struggle to obtain sufficient US currency through conventional banking channels to replenish stock.<\/p>\n
Importers may also face higher freight, customs and processing costs.<\/p>\n
Businesses cannot endlessly absorb those increases.<\/p>\n
Eventually there are only three choices: increase prices, accept smaller margins or close.<\/p>\n
And increasing prices carries its own danger.<\/p>\n
Consumers are facing many of the same pressures.<\/p>\n
Food, utilities, transportation and household expenses compete for increasingly stretched disposable income.<\/p>\n
The business therefore reaches a point where raising prices enough to protect its margin causes customers to buy less.<\/p>\n
But the rent remains unchanged.<\/p>\n
WHEN A BUSY BUSINESS STILL LOSES MONEY<\/p>\n
This is one reason judging businesses by customer traffic can be deceptive.<\/p>\n
A restaurant can be full and still struggle.<\/p>\n
A clothing store can have customers constantly entering and still fail.<\/p>\n
A supermarket can process millions of dollars and operate on extremely thin margins.<\/p>\n
Revenue is not profit.<\/p>\n
Suppose a retailer generates TT$200,000 monthly and its total occupancy cost is TT$35,000.<\/p>\n
Almost 18 per cent of sales has disappeared before the business pays for its stock or a single employee.<\/p>\n
If the gross margin on the products is 30 per cent, TT$200,000 in sales generates only TT$60,000 in gross margin before operating expenses.<\/p>\n
Take TT$35,000 for occupancy and only TT$25,000 remains.<\/p>\n
From that must come wages, electricity, insurance, security, banking charges, accounting, advertising, losses and everything else required to operate.<\/p>\n
The business can therefore have TT$2.4 million passing through its registers annually and still be financially unhealthy.<\/p>\n
THEN COMES INTERNAL LOSS<\/p>\n
There is another expense businesses rarely discuss publicly: theft and internal leakage.<\/p>\n
Retail losses do not come exclusively from shoplifters.<\/p>\n
Businesses can lose money through unauthorised discounts, manipulated refunds, false voids, stock disappearing, cash shortages, supplier irregularities, inflated overtime and other forms of employee misconduct or weak internal controls.<\/p>\n
Even relatively small losses become significant when margins are already compressed.<\/p>\n
If a business earning a net margin of three per cent loses another two per cent of sales through theft, wastage or poor controls, most of its profit has disappeared.<\/p>\n
That makes inventory management and financial controls survival issues rather than administrative inconveniences.<\/p>\n
WHY LOCATION CLOSURES MATTER<\/p>\n
Not every business closure means the company itself has failed.<\/p>\n
That distinction is important.<\/p>\n
When a retailer closes one location but continues successfully operating several others, it may reveal more about the economics of that particular location than the health of the company.<\/p>\n
Management may conclude that the customer traffic simply does not justify the rent, staffing and operating costs attached to that branch.<\/p>\n
Closing can therefore be rational rather than desperate.<\/p>\n
The important question becomes:<\/p>\n
Why can the same business model survive in one location and fail in another?<\/p>\n
Rent, traffic, customer demographics and occupancy costs are obvious places to look.<\/p>\n
IS RENT BECOMING THE REAL BUSINESS?<\/p>\n
This brings Trinidad and Tobago to the more uncomfortable part of the discussion.<\/p>\n
For generations, property ownership has been viewed as one of the safest routes to wealth.<\/p>\n
Buy land. Build property. Rent it.<\/p>\n
Collect every month.<\/p>\n
There is nothing inherently wrong with that model.<\/p>\n
The concern arises when owning the building becomes consistently more attractive than creating the productive business operating inside it.<\/p>\n
The property owner does not have to import shoes, manufacture furniture, operate a restaurant kitchen or convince consumers to purchase electronics.<\/p>\n
The tenant does.<\/p>\n
Yet the tenant must generate enough economic activity to pay everyone, including the landlord, before discovering whether anything remains for themselves.<\/p>\n
In a slow-growth environment, passive property income can therefore appear substantially more attractive than entrepreneurship.<\/p>\n
And that creates a wider economic problem.<\/p>\n
WHEN CAPITAL CHASES PROPERTY INSTEAD OF BUSINESS<\/p>\n
Imagine an investor with TT$5 million.<\/p>\n
One option is to build a business.<\/p>\n
That means employees, inventory, customers, taxes, competition, forex, theft, regulations and constant operational risk.<\/p>\n
Another option is property capable of generating rental income.<\/p>\n
Which looks safer?<\/p>\n
If enough investors reach the same conclusion, capital naturally moves towards property rather than productive enterprises.<\/p>\n
But property by itself does not manufacture exports.<\/p>\n
It does not necessarily generate foreign exchange.<\/p>\n
And a building cannot prosper indefinitely without successful businesses capable of occupying it.<\/p>\n
That is why landlords and tenants ultimately have the same long-term interest.<\/p>\n
A mall filled with businesses paying enormous rents is valuable.<\/p>\n
A mall filled with locked shutters is not.<\/p>\n
SOMETHING EVENTUALLY HAS TO GIVE<\/p>\n
The solution is not government arbitrarily deciding what every landlord can charge.<\/p>\n
Nor is it pretending every failed business was destroyed by rent.<\/p>\n
Poor management, weak concepts, excessive borrowing, bad locations and changing consumer behaviour kill businesses too.<\/p>\n
But commercial property owners also have to recognise when the economics facing tenants have fundamentally changed.<\/p>\n
A landlord can refuse to reduce TT$30,000 monthly rent and eventually receive TT$0 from an empty unit.<\/p>\n
More flexible arrangements deserve consideration.<\/p>\n
Turnover-linked leases, where rent contains a base amount combined with a percentage of sales, can allow landlords and tenants to share some of the upside and downside.<\/p>\n
Businesses should also calculate their true occupancy ratio before signing leases rather than simply asking whether they can afford the monthly rent today.<\/p>\n
CAM, taxes and other mandatory occupancy expenses must be included.<\/p>\n
A beautiful location is irrelevant if the mathematics cannot work.<\/p>\n
THE BIGGER WARNING<\/p>\n
So, is rent killing businesses in Trinidad and Tobago?<\/p>\n
Not by itself.<\/p>\n
Rent becomes dangerous when fixed occupancy costs collide with weakening revenue, rising operating expenses, foreign exchange constraints, taxation, labour costs and internal losses.<\/p>\n
And that explains why two apparently identical businesses can experience completely different outcomes.<\/p>\n
One owns its building.<\/p>\n
Another rents from family.<\/p>\n
Another negotiated an anchor rate.<\/p>\n
The fourth pays full commercial rent, CAM and associated charges every month.<\/p>\n
Same country.<\/p>\n
Same customers.<\/p>\n
Same products.<\/p>\n
Completely different mathematics.<\/p>\n
That may ultimately be the biggest warning hidden behind the growing conversation about business closures.<\/p>\n
The dream of owning property and collecting rent every month is perfectly rational.<\/p>\n
But when owning the building becomes considerably safer and more rewarding than operating the business inside it, entrepreneurs eventually begin asking themselves why they should bother taking the additional risk.<\/p>\n
And an economy cannot survive on landlords alone.<\/p>\n
Someone still has to run the businesses that create the jobs, sell the products, provide the services and generate the money from which the rent is paid.<\/p>\n
The shuttered storefronts appearing across Trinidad and Tobago should therefore prompt a question much bigger than why another business closed.<\/p>\n
Have we reached the point where owning the building is becoming a better business than running the business inside it?<\/p>\n","protected":false},"excerpt":{"rendered":"
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