Retail Rent Collections Continue to Increase in September

Retail rent collections are continuing to increase. In September, national retailer rent collections increased to 80% for the first time since the onset of the pandemic, according to data from Datex Property Solutions Tenant Track Report. Total retail rent collections trended behind national tenants at 77%, while non-national retail collections were 73.6%.

“The peak suggests that month-by-month, we are digging our way out of the deep Rent Collections hole created by the pandemic,” Mark Sigal of Datex, tells GlobeSt.com. “Plus, bolstering this rebound is the fact that cities are getting better at supporting retail by making outdoor permitting for seating and operations easier to secure,  and coming up with retail opening standards that better reflect the COVID-19 health of a specific city or community.”

Increasing rent collections are not a sign that the market has recovered, however. There is still a rocky road ahead for the retail market, particularly early next year when rent deferral negotiations expire. “We are not in the clear by any stretch for the following reasons,” says Sigal. “One, many of the rent relief agreements negotiated between landlords and tenants in Q2, which are mostly rent deferrals and not abatements, are coming due in Q4, 2020 and Q1, 2021. This represents overhang that could create rent collections pressure at end of the year. Two, the government has failed, so far, to backstop the economy by agreeing to a new economic stimulus plan, which was a godsend in Q2 and into early Q3. Three many Retail categories remain extremely weak as noted by falling retail sales per square foot numbers and rising occupancy costs.”

The risk of another surge in the fall or winter could derail rent collection growth, but it isn’t the only challenge ahead from retailers. “Two big variables here create risk. One is the absolute risk of a new surge, which can lead to reinstatement of shutdowns and tightening of restrictions,” says Sigal. Second is the fact that with Winter coming, many of the outdoor options become more problematic in cold, wet or snowy weather. Add to that the normal flu season, which means with more people working and schooling from home, and we could easily see struggles re-emerge as cold weather kicks in.”

For that reason, there continues to be a lot of risk for retail owners in the coming months. “We continue to believe that while retailers, developers and local municipalities are working smartly and in concert to protect and sustain retail, there is a lot of risk, and thus, the lack of support by the federal government through additional stimulus is short-sided,” says Sigal. “Never bet against American ingenuity and entrepreneurialism, but also recognize the conditions on the ground, as it feels like at least 120 days before we get to any vaccine that is able to be administered at scale. Until we resolve the health crisis, the economic recovery remains very fragile in our opinion.”