Shopping centres cut rents in bid to keep vacancies low
While it's not at a crisis point for the landlords, rents have fallen, on average, by 0.5 per cent in the past year to the end of March, for stores that sell anything else but food.
This is across the sector, with Westfield's co-chief executive Steven Lowy, warning in February, that lower rents would prevail for new store leases in its centres.
In some cases, for new leases, that could see a reduction of as much as 5 per cent in rents.
Specialty stores range from hair and nail salons to fashion boutiques and apparel chains.
According to the national retail analyst at Jones Lang LaSalle, Andrew Quillfeldt there is limited scope for specialty store rental growth within the next 12 months.
In the Jones Lang LaSalle's national retail data for the March quarter, and for the year to March, the figures show that retail rents on average across all formats declined about 0.5 per cent in the 12 months to March 2013.
"The limited rent growth is because many of the domestic fashion retailers are still cautious about expanding, but landlords are now actively trying to drive income growth in individual centres by commencing refurbishment and expansion programs on their major assets," he said.
Mr Quillfeldt said the declines have been localised rather than a broad-based effect across all markets and retail formats and performance still varies significantly from centre to centre.
The head of retail, property and asset management at Jones Lang LaSalle, Tony Doherty, said the patchy retail sector has led landlords and centre managers to become increasingly realistic with leasing expectations.
"The importance of ensuring we have quality retailers is greater now than ever. Taking a high risk on retailers that are prepared to pay a higher rent is not always the best alternative," Mr Doherty said.
Frequently Asked Questions about this Article…
Landlords are cutting shopping centre rents because specialty retailers face pressure from online shopping, households are saving more, and consumer interest in some goods has fallen. Lowering rents is a way to retain tenants and keep vacancy rates down, rather than letting spaces sit empty.
According to Jones Lang LaSalle's national retail data, retail rents across all formats fell by about 0.5% in the 12 months to the end of March (year to March 2013). The decline is modest and not described as a sector-wide crisis.
Specialty stores — such as hair and nail salons, fashion boutiques and apparel chains — are most affected. The article specifically notes rents for stores selling anything other than food have seen these declines.
Jones Lang LaSalle's national retail analyst Andrew Quillfeldt says there is limited scope for specialty store rental growth within the next 12 months. However, declines have been localised and performance still varies significantly from centre to centre.
Westfield co-CEO Steven Lowy warned that lower rents would prevail for new store leases in its centres. In some cases, new leases could see rent reductions of as much as 5%.
Landlords are becoming more realistic with leasing expectations and are focusing on driving income growth through refurbishments and expansion programs on major assets. They are also prioritising quality, lower‑risk retailers over tenants who might pay higher rent but pose greater risk.
No. Jones Lang LaSalle notes the declines have been localised rather than broad‑based. Performance varies significantly from centre to centre and from one retail format to another, so some centres are faring better than others.
The article quotes Westfield (via co‑CEO Steven Lowy) and retail experts from Jones Lang LaSalle, including national retail analyst Andrew Quillfeldt and Tony Doherty, head of retail, property and asset management.
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