The Golden Age of Retail Growth is Over

Industry analyst and forecaster, BIS Shrapnel, has predicted it will be another decade at least before bricks’n’mortar shops return to reasonable growth in the retail category.

This recent report focussed on retail property trends and identified that shopping centre incomes were protected to some extent by automatic fixed rental escalations of around 4%.  “The problem is that if rent is going up by four per cent a year but turnover is growing by less than that, occupancy costs rise,” says a BIS Shrapnel spokesperson. “Specialty shop occupancy costs are at an all-time high. They are unsustainably high for some tenants.”

Those costs are leading occupants to either not renew at the end of the lease or demand a cut in rent to stay. If they leave, the incoming tenant is achieving a more attractive offer, in a combination of lower rent and/or leasing incentives. “There’s widespread evidence of slowing centre income growth as a result”.