Retail landlords feeling the pinch
While food-based malls are faring better, landlords of bigger mixed-use centres are under pressure to offer incentives to keep shops open, or restyle the malls to entice shoppers.
International retailers, pop-up shops and enlarged food courts are a few of the avenues being pursued by landlords. But even these have not held off a shift in rents and lease terms from 10 years back to five in some cases, and for department stores, from 20 years to 10, for renegotiated contracts.
Landlords will always make a profit from a mall through redevelopment, sharing in cinema profits, car parking fees and capital growth from the land and buildings. But sustained weakness takes its toll, leading to lower rents being offered to get shops leased.
The latest report from Jones Lang LaSalle, covering the first half of this year, shows the average vacancy had risen from 3.5 per cent to 4 per cent.
The Jones Lang LaSalle head of retail, property and asset management, Tony Doherty, said even though many retailers had been strengthening their business over the past 18 months, the leasing market remained tough and it was becoming more challenging to attract new tenants.
"While vacancy rates have remained elevated, leasing activity is rising, reflecting the higher rate of tenant turnover ... as landlords go through the slow process of optimising their tenant mix," he said.
Frequently Asked Questions about this Article…
The article says sustained weakness in retail demand has pushed vacancy rates up and led landlords to offer lower rents and incentives to keep shops open, particularly in larger mixed‑use centres where tenant attraction is tougher.
Yes — food‑based malls are faring better, while bigger mixed‑use centres are under pressure to offer incentives, restyle space or adopt new tenant mixes to entice shoppers and reduce vacancies.
Landlords are pursuing international retailers, pop‑up shops, enlarged food courts and other incentives, and in some cases redesigning malls to make them more appealing to shoppers and potential tenants.
The article notes a shift toward shorter leases: some ten‑year leases are being renegotiated down to five years, and department store contracts have moved from around 20 years to about 10 years in some renegotiations.
According to the article, landlords can still profit from redevelopment projects, shared cinema revenues, car parking fees and long‑term capital growth on the land and buildings, even when rental income softens.
Jones Lang LaSalle’s report covering the first half of the year showed average vacancy rising from 3.5% to 4%, signalling an uptick in empty shop space across shopping centres.
Leasing activity is rising, but the article quotes JLL’s retail head Tony Doherty saying the market remains tough — higher leasing activity reflects greater tenant turnover as landlords work to optimise tenant mix, not necessarily stronger long‑term demand.
Everyday investors should monitor vacancy rates, rental trend changes and lease‑term shifts, landlords’ use of redevelopment and alternative income (like parking and cinemas), and moves toward food and pop‑up concepts — these factors can indicate how shopping centres are adapting to softer retail conditions.
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