Down trend in retail rents for the first time in 15 years

Posted under Advice by Michael

It is blessing in disguise for retail stores as rents have started falling in 2008 for the first time in 15 years and are unlikely to go up until 2013.

The fall in annual rents and opening of 2.5 million sq ft area of new shopping centre would substantially strengthen retailers’ bargaining power with landlords during their toughest struggle for survival in hostile trading conditions.

Retail rents, which had tumbled by 1.9% in 1993, declined by 0.4% in 2008 as reported by Stephen Springham, the head of property services company King Sturge.

According to Stephen, 2009 would be tougher for retail sales, but it would get some leeway on rental which would favour them to continue trading and provide much-needed relief.

King Sturge is forecasting fall of 5.6% in 2009, 4.7% in 2010 and 2.1% in 2011. 2012 would see no rental growth but rents would jump by 1.6% in 2013. Its report states that 90% of 2.5 million sq ft area of new shopping centre would be leased out to retailers in 2009 on favourable terms such as monthly payments, break clauses, rent-free periods and contributions to shop fitting fees.

According to Stephen, many retailers would insist for monthly rents since it provides lot more fluidity. Landlords would be pushed to address various issues pertaining to retail renting.