InvestNow News – 8th May – APN – What’s next for retail REITs?
April 22, 2020 Pete Morrissey
If you’ve been to your local shopping centre lately, well, I’m surprised. Deemed essential services, they remain open but have the feeling of a ghost town. Footfall, as visits are known in the trade, has been in freefall. Supermarkets are buzzing but discretionary retailers are closing their doors, despite no legal obligation to do so.
Footfall in freefall
When revenue is next to nothing and no date has been set for a return to normal trading, whatever that looks like, slashing costs is now the only option. Staff were the first to go, with Flight Centre announcing the closure of half its global stores with the loss of 6,000 jobs worldwide1.
Other retailers, including Premier Investments, owners of Jay Jays, Smiggle and Just Jeans, has taken the “nuclear option” in the words of the Australian Financial Review, planning to stop paying rent altogether2.
While tenants make the case for rent holidays and reductions, John Gandel, who owns half of Chadstone, Australia’s largest shopping centre, is reminding them that rent is “a legal obligation”3. It’s a measure of how much has changed in a few short months that this point needs to be made in the first place.