17 Sep 2021

Landlords show willingness to negotiate retail rents as vacancy rates increase

12:50 pm on 17 September 2021

Landlords are doing what they can to hang on to retail tenants as the lockdowns bite into cashflow in the absence of critical foot traffic.

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Vacancies for prime retail spots in CBDs are between 6 and 8 percent. Photo: 123rf

Recent surveys by commercial property broker Colliers has found vacancy rates were between 6 and 8 percent for prime retail in the central business districts, up from about 4 to 5 percent 18 months ago.

"From the stats that we've seen in some of the major locations, because the people aren't there, the tourists aren't there when we go into lockdown the office staff aren't there as well, and so that is difficult," Colliers head of research Chris Dibble said.

That's why we have seen these vacancy rates increase in centralised strip retail locations. It's not for everywhere, but we have seen it."

A rash of empty shops in Auckland's Queen St and Wellington's Golden Mile of Lambton Quay is something landlords want to prevent.

Colliers head of research Chris Dibble said the increased vacancy rate offered an opportunity for retailers to negotiate reasonable leasing terms, as landlords were more accommodative in the current environment.

"Some landlords are taking the stance in regards to 'we'll give you a 50 percent rent-free for as long as being in alert level 4' ... and we're also seeing landlords talking to the tenant saying 'hey look, if the cash flow is not coming in let's defer some rent payments for now,'" he said.

Dibble said demand for well-located retail space was high ahead of the current lockdown and expected that to bounce back with the economy.

He said tenants willing to take a risk had an opportunity to secure prime retail space ahead of that curve.