JEDDAH: A number of Jeddah business owners have joined hands to form a trade bloc to fight soaring rents of commercial properties in the absence of effective regulations that prevent landlords from making reckless hikes, Al-Eqtisadiah business daily has reported.
"Rents devour nearly 60 percent of our revenue," said a group of businessmen. "This has forced many retailers and small traders to shut down their showrooms so as to avoid incurring huge losses. The landlords' greed and the absence of effective regulations are the main reasons for the mess. Owners of commercial buildings exploit the situation and cash in on the unorganized state of small traders."
Ahmad Al-Ali, a trader of building equipment, said the new bloc would strive to contain unreasonable rent hikes. "We have decided to shut down our showrooms and vacate buildings when landlords resort to unreasonable hikes in rents in violation of the provisions of the signed contracts. We have become victims of the greed of many landlords who have made exorbitant hikes over the past year. This has resulted in mounting pressure on us and put an adverse impact on both the trader and the consumer."
According to Al-Ali, the continuous hikes have also driven out many new investors and traders from the commercial sector. "The traders have to set aside a huge part of their revenue to pay rent. This brings down not only the profit margins but also customer confidence. Moreover, it has also contributed to the upward trend of unemployment among Saudis, as many traders are either forced to cut staff or to close down their shops and exit the field."
Al-Ali attributed the failure of about 50 percent of small ventures to high rents.
"The consumer is the ultimate loser of such exorbitant rent hikes. It is usual for the traders to raise prices to adjust with rent hikes. This results in eroding consumer confidence as they see variations in prices of the same goods sold at different shops," he said, stressing that the landlords are doing injustice not only to traders but also to customers.
On his part, Muhammad Al-Amri, trader of exercise equipment, called on the agencies concerned to support the small and medium enterprises (SMEs) so as to enable them to take part in the Kingdom's economic growth. He drew attention of the authorities to the rent hikes' negative impact on SMEs.
"These landlords are instrumental in driving small investors and traders out of the market. Some of them have raised annual rents from SR500,000 to SR1 million within two years," he pointed out.
© Arab News 2011
