Specialty Tenants Feeling the Pain

By Jared Hodge

More shopping centre specialty tenants are asking for rent relief as they battle the threat of e-commerce and a softer retail environment, according to an industry survey.

The threat of disruption is also pushing shopping centre landlords to manage their malls better, by bringing in tenants less likely to lose business to online shopping.

A recent survey was done recently to shopping centre managers, which covered 62 neighbourhood and 29 sub-regional centres in its analysis.

“We found that a number of landlords are transitioning their tenant profiles with retailers who are less likely to be disrupted by online retailing,” Said by a property and asset manager in Australia.

“A number of centres are shifting their offering to food, services, entertainment and leisure uses and focusing on marketing initiatives to drive customer traffic.

“In addition to food and beverage operators, it is health, gyms, medical centres, other medical-related services and insurance that are expanding in shopping centres.

“However, in some centres the amount of food and beverage tenancies has begun to create competition for existing operators. And the expanded offering of the supermarkets has started to result in lower demand from speciality food retailers.

“But overall, food operators continue to drive tenant enquiry levels while online retailing continues to be a key headwind for the fashion segment.”

‘We have a view of what the value of that space is’
A survey comes as some of the country’s major landlords take a tougher line on demands for rental relief from struggling tenants.

“It’s pretty often that retailers want to try to take advantage of the situation to try to get cheaper rents,” Peter Allen, who runs Scentre, the country’s largest property trust, told The Australian Financial Review last month.

“But in the end that does not provide a sustainable opportunity for them to retain space. We have a view of what the value of that space is.”

Landlords are facing a challenge as fashion retailers rationalise their portfolios, among them Specialty Fashion Group, Diana Ferrari, Michael Hill and Myer.

Another survey identified another eight retailers that have collapsed since its last report six months ago. A total of 108 stores are potentially facing closure.

Enquiry remained subdued and rental growth is constrained, it found. Greater levels of incentives were required to secure new tenants, it said, noting that some landlords were opting for pop-up retailers to fill vacancies over the short term.

“An increased number of centre managers noted more specialty tenants were requesting rental assistance” the report said.


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