Total retail rent collections approached 91% last month, the first time since March 2020 that collections eclipsed the 90% mark. May collections clocked in at 90.85%, up more than a percentage point over April figures, according to new research from Datex Property Solutions.
National tenants performed even better than the national average, at 94.27% (versus 93.45% in April). Rent collections among non-national tenants came in at 87.12%, nearly two percentage points higher than April’s figure and only 1.4% off its 2020 high. And collections for both national and non-national tenants are now less than one percent from their peaks for all of 2020; at this point last year, aggregate collections were down 48% from current numbers.
Mark Sigal, CEO of Datex Property Solutions, tells GlobeSt.com that landlords will likely take “a harder line” in 2021 (as opposed to 2020, when “landlords bent over backwards to not evict laggard rent payers,” he said). That, in turn, will push non-national tenants to pay their rents on time, driving higher collection rates.
“This is also bolstered by the fact that the rent relief agreements negotiated in 2020 are mostly being paid down in terms of deferred rents, freeing up capital,” Sigal said. “At the same time, a stronger market with more deals that have a percentage rent component should grow aggregate rents throughout the year.”
Sigal predicts the heady summer travel market will also bolster several retail categories (and thus retailers’ capacity to pay rent and expand with new leases at higher rents). He cites a rolling 31-day view of TSA checkpoint travel numbers that shows a 470% increase relative to this same time last year.
“What do consumers do when they plan and take vacations? They exercise so they look good in their summer wear or swim wear. They get haircuts, manis and pedis, and buy new outfits. They eat at nice restaurants and re-stock on the essentials and sundries that were not replenished in the year prior,” Sigal said. “Having foregone a year of travel, and relatively flush, the consumer will likely overspend, which bodes well for more categories of retailers.”
Finally, consumer spending is expected to tick up as the country full reopens over the next few weeks. This will translate to stronger sales for retailers, Sigal says, which will in turn drive higher rent collections.
“Meanwhile, as more landlords negotiated percentage rent clauses into their leases as part of the mass of rent relief agreements they granted their retailers in 2020, we expect to see a rise in the number of tenants eclipsing their breakpoints, creating adjunct income from retail portfolio owners,” he says.