More tenants start refusing to renew leases
Even as retail development pipeline has $10b excess.
According to Nora Farren, Director of Research at Colliers International, across the major listed retail property owners, the retail development pipeline is in excess of $10 billion, indicating that refurbishment and expansion are key to attracting new tenants and continuing to drive demand, as we have seen in many CBD retail projects of late.
While the long-term outlook of the sector continues to be strong, retailers encounter certain short-term challenges as well.
“Overall, rents on new leases continue to be lower than expiring rents and fewer tenants are opting to renew leases. The leasing market is anticipated to remain challenging over the short term, with lower rents on new store leases expected to remain a feature of the market over the course of 2013,” said Michael Bate, Colliers International’s Head of Retail.
Despite the relatively low vacancy rates, lease incentives are now being offered by owners to attract and retain tenants. According to the report, these incentives have a tendency to be higher for the fashion industry and lower for the food retailers.
In addition, sales productivity and high foot traffic locations have become top priorities for retailers looking for the right location for their business. The report illustrated that retailers would rather choose to pay a higher rent in a highly productive location, than a lower rent in a less productive centre.
Read the full research report from Colliers International here.
