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Oz Retail Rents May Dip 30% Next Two Years

Australian retail rents are tipped to drop by as much as 30% in the next two years from the economic impact of COVID19, according to new analyst forecasts.

The news comes after the Australian Competition and Consumer Commission granted interim authorisation for retailers to collectively bargain with landlords on rent relief amid the pandemic.

Speaking to AFR, a Jefferies analyst claims the the current situation has quickened the de-rating of malls alongside international peers, whilst accelerating the rebasing of rents.

The analyst is forecasting retail rents to slip as much as 20% – 30% in the next 24 months.

Yesterday, the Australian Bureau of Statistics preliminary retail numbers revealed a better-than-expected surge in March spending, however, commentators warn the spike was driven by ‘panic buying’ (of grocery staples and home office equipment) with tough times ahead.

According to the AFR, ASX-listed Super Retail Group (which operates Rebel, BCF and many other retail brands) has deferred its rent until later this year.

Many market commentators suggest notable write-downs in values for large-scale shopping malls are also probable.

It comes as the Australian e-commerce sector continues to accelerate, with the likes of Myer notching a whopping 800% increase in online sales over its Easter long weekend sale.

As previously reported, the iconic Australian department store re-hired 2,000 workers to assist with online fulfilment, after standing down 10,000 workers and temporarily closing its stores.

Wesfarmers-owned Kmart has also seen a huge spike in online orders, and is continuing to invest in its group’s long-term digital capabilities with the $230 million purchase of Catch Group.

Kmart recently issued a lengthy apology letter following consumer furore over delayed online deliveries after significant demand.

As the local retail industry continues to navigate COVID19, commentators claim weakened landlord bargaining power may also see rents slip.

The option of more progressive rental agreements could rise in lieu of traditional leasing structures.

The news comes as the Australian retail market continues to battle the threat of online shopping, with many market watchers warning some traditional retailers may not survive the economic impact of COVID19.

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