The place Are Retail Rents Heading?

Where Are Retail Rents Heading?

Retail rents are a big question mark these days. On the way into late summer, tenants are starting to apply for lease amendments and concessions, but rents haven't stalled yet. At some point that will change, but predicting where rents will go is a challenge, especially since there is a dual market with substantial and non-essential tenants. But there are other factors that make predicting retail rental prices – and therefore retail investments – challenging.

"It is very difficult to say and it depends on a number of factors such as the location of the mall, the mix of tenants and the types of services and / or goods that each tenant offers." Chris Rizza, a partner at Crosbie Gliner Schiffman Southard & Swansontells "Rents are also likely to be affected by the development of a COVID-19 vaccine and the result of the presidential election."

For non-essential purposes, retail rental collections have declined, which could be a precursor to the decrease in rental rates. For essential purposes, however, rents were stable. In addition, retail spaces with open spaces and outdoor areas will also have better pedestrian traffic and thus more stable rents. “In general, I think that outdoor shopping center rents tend to remain more stable than indoor shopping center rents. With knowledge of the virus, people may feel a little more secure when they are outdoors and spending time in shopping malls, ”Rizza says. "Rents for tenants with a significant online presence may decrease as those particular tenants may no longer see the benefit of taking the risk of paying the rent for a physical presence."

However, selected non-essential uses could recover quickly and contribute to more stable rents. “I believe rents will generally remain stable for tenants providing essential services such as grocery stores, home improvement, or experiences like gyms, cinemas, restaurants and bars. There are sections of the public that are eager to return to a sense of normalcy, ”says Rizza.

Ultimately, retail rental trends will follow consumer activity and depend to a large extent on home ordering. "Once home stay orders are cleared, I believe that a large segment of the public will return to companies that have experience of what should justify maintaining rental rates for these companies," added Rizza.


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