One commercial sector that has suffered more than most during the pandemic is retail, hit with the dramatic drop in foot traffic due to social distancing restrictions and people’s fear of going out in public.
However, as the road to recovery takes shape and restrictions continue to ease, experts are confident that retail has enough gas left in the tank to restart its economic engine.
Colliers retail leasing director Luke McGrath believes Brisbane will bounce back better than other states because of its multibillion-dollar infrastructure program that was already well under way.
He said the Sunshine State was also set to benefit from an uptick in interstate migration.
“Queensland was showing positive net migration numbers prior to the lockdown,” Mr McGrath said.
“I see the numbers swelling, as they did post-2008 recession, where people are looking for a sea change, and what better place than sunny Queensland?”
During the lockdown, retail tenants and landlords had to adopt a collaborative approach to survive the economic uncertainty, according to Cushman & Wakefield head of investment sales national director Michael Collins.
He said the most successful outcomes during the crisis had resulted from open and “quid pro quo” discussions between tenants and landlords.
“Both landlords and tenants are doing their best to navigate these uncertain times, and many landlords are supportive, particularly where occupiers show they are doing it tough but also having a crack,” Mr Collins said.
“Many landlords are optimistic and forecasting a V-shaped recovery and, as such, they’re providing rent-free or relief periods now in return for ten or 15-year leases where tenants are struggling.”
Cushman & Wakefield national investment sales director Aaron Dahl said the national code of conduct for commercial tenancies had helped to create balance during negotiations over recent weeks.
“Where there is genuine hardship for either party, there is no easy solution,” he said.
“However, the [code] is designed for those hit worst by the pandemic and ensures one party isn’t hard done by.”
CBRE Pacific retail property management regional director Meagan Wakefield said occupancy levels had held up relatively well during the crisis, especially in larger centres.
“Large-format retail continues to be a shining light, with occupancy trending at 85 per cent to 90 per cent, and in some cases 100 per cent, and sales are strong in this sector,” she said.
“Neighbourhood centres continue to be resilient, plateauing at an average of 85 per cent occupancy.”
She said about 70 per cent of neighbourhood-centre tenants had requested rent relief, but the financial impact was less than 40 per cent of the income.
Mr Collins said it was too early to have definitive data on the impact of the crisis on the retail leasing sector.
However, green shoots of activity were happening in the Brisbane retail sector, with restrictions easing in stages over coming weeks.
“The retail sector comprises a range of sub-sectors and while some are under pressure others are trading exceptionally well,” Mr Collins said.
“For example, fast food outlets with drive-through access for customers are performing very strongly while other retailers have shut their doors.”
Likewise, Mr McGrath said some retailers had already started to report better than expected sales with so-called “revenge” spending appearing to take place.
“There will be adjustments to how we shop and spend there is no doubt about that,” Mr McGrath said.
“However, it’s the retailers who are able to adjust to the new market that will become the new market leaders.”
Yet, even in the midst of a severe market slowdown, some retail leasing deals were still taking place across south-east Queensland.
A homewares retailer leased space with a net lettable area of 78 square metres in Redbank Plains, according to Ray White Commercial.
The three-year lease deal secured gross rent of $364 per square metre, starting from late April.
Ray White Industrial M1 North sales & leasing consultant team leader Lisa Dunne said the slowdown had actually assisted the business prepare for opening its doors.
“The tenant felt that the current market provided time to set up the business ready for trading to start. Also, they were able to get a great deal in the current climate,” she said.
Mr Collins said most retailers were now reopening or positioning themselves to reopen, albeit with one eye on what the future might hold.
“We are still in the phase where many are looking at their options to sustain and positioning themselves to reopen their doors once the restrictions ease,” he said.
“We have even seen some negotiating longer-term leases with shorter-term incentives, so that both parties can look forward with greater confidence.”
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