The real estate market might be booming, but retail landlords are having a tough time, with tenants struggling to pay rent, breaking leases and vacating shops as bricks-and-mortar falls out of favour.
While retail was already in a state of flux before Covid hit, lockdowns and social distancing restrictions proved the final straw for many retail tenants, with inner-city cafes among the sector suffering the most.
But a Sydney property specialist told The Urban Developer that it’s a bloodbath out there, with landlords hemorrhaging money as tenants cry poor. And no-one knows when it’s going to get better.
“There’s plenty of landlords out there who want to go back to the good old days, but rents continue to be deferred. It’s impossible to know when things will return to normal again, and it’s a matter of how long you can afford to hold out for, in many cases.
“No landlord in their right mind would let go of a tenant at the moment. Creating vacancies is like painting pimples on your face,” the specialist, who preferred to speak on the condition of anonymity says.
Retail trade was the single highest private sector contributor to employment in Australia and, in 2019, total retail sales at shopping centres was estimated to be $141 billion, equivalent to 7.4 per cent of Australia’s gross domestic product.
The sector had a long way to fall. Shopping centres account for around 46 per cent of total retail space in Australia, equating to approximately 106sq m of gross living area per 100 people—a relatively high number by world standards.
Demand for retail tenancies declined through 2020, with vacancy rates increasingly sharply. These are predicted to increase further, as department stores and large retailers announce plans to further reduce the size of their floor space over the next couple of years, according to Reserve Bank of Australia modelling.