The Merchants' Federations welcome the adoption in the Senate of a rent cap for VSEs and SMEs

However, they deeply regret that this measure excludes a large part of the retail brands and their tens of thousands of stores and call for the opening of works to adapt and rebalance the relationship between landlords and their retail tenants in the long term.

On Friday, July 29, the Senate adopted an amendment* by Senator Jean-Baptiste Lemoyne with the support of the Government wishing to cap the indexation of commercial rents at a maximum of 3,5% over one year.

The adoption of this measure follows the consultation led by Olivia Grégoire, Minister Delegate for Trade, between the representatives of the donors and the representatives of the traders as she had undertaken during the examination in public session at the Assembly of the draft law on emergency measures for the protection of purchasing power.

The federations of signatory traders warmly welcome the strong mobilization of parliamentarians both in the National Assembly and in the Senate, as well as that of the Minister and his Cabinet to conduct this consultation within a tight deadline.

The adoption of this emergency measure marks an awareness of the public authorities of the need to control the weight of property charges weighing on traders. This measure is essential to protect companies from the increase in their rent due to current and future inflation in the coming months.

* https://www.senat.fr/amendements/2021-2022/828/Amdt_430.html as amended by the Government https://www.senat.fr/amendements/2021-2022/828/Amdt_455.html

However, the traders' federations strongly regret that this measure is limited to very small businesses and SMEs. They denounce the lack of awareness by donors of the reality of developments in the sector and the difficulties encountered by traders of all sizes, including medium-sized companies and large companies.

They are a reminder that the vitality of commerce is based on the diversity of its formats both in the city center and on the outskirts. The retail trade in France represents 2,1 million jobs, 435.000 companies of all sizes, 300.000 points of sale throughout France and more than 300 professions.

The rent represents the second item of cost and can weigh up to 20% of the turnover of a point of sale. Shopkeepers can no longer bear high rent indexations and an excessive level of rental charges given the reality of their physical activity and the economic context. Due to changes in customer purchasing behavior, in-store footfall and activity fell sharply: -16,6% traffic and -2% in-store activity across all sectors in the first half of 2022 compared to 2019**. This drop in activity can reach -10% in the personal equipment sectors. At the same time, online sales are growing strongly for all businesses (+42% in 2021 vs 2019***). As the conclusions of the Assises du commerce specify, commerce will suffer “the effects of a tsunami linked to its digitization”, and must therefore invest heavily for its digitization, but also its ecological transition.

Under these conditions, the signatory federations ask the Government to quickly open, in the continuity of the Assises du Commerce, work to rebalance the relations between lessors and lessees with the aim of perpetuating all physical businesses.

For the representatives of the signatory federations: “The adoption of a ceiling on the evolution of rents for VSEs and SMEs for one year is excellent news. The commitment of parliamentarians and the Government was essential in reaching this solution. This is an essential emergency measure to control the rise in rents in the inflationary context that we are experiencing. However, this measure is only a first step! We deeply regret that ETIs are excluded from its scope, although they are essential to the vitality of trade. The digital and ecological transformation impacts all businesses, regardless of their size and location. These developments require the completion of substantive work at the start of the school year to rebalance relations between landlords and tenants in the continuity of the Assises du Commerce. This is the only possible way to save physical businesses and its millions of jobs in the territories.

*Reminder: commercial rents are indexed to the commercial rent index (ILC) calculated each quarter on the basis of inflation at 75% and changes in the cost of construction at 25%.

Despite the revision of its calculation method at the start of the year, the ILC has experienced very strong increases since autumn 2021, which will accelerate under the effect of inflation. The index published last June for the first quarter of 2022 already stood at +3,32%. The index could exceed 6% by the end of the year given the level of inflation envisaged (7% in trend by the end of 2022 and 5,5% over the year according to INSEE) .

**Source: Procos

***Source Fevad key figures – Evolution of online product sales turnover