ZONE A retail rents in Liverpool city centre have plummeted 15.6% in less than a year, a new report has revealed.
In September last year, LDP Business reported that top-end retail rents in the central retail district, including at the Liverpool One development, stood at £320 per sq ft.
This has now plummeted to £270 per sq ft as the recession takes a grip. This now leaves it a long way behind Manchester’s Trafford Centre, where rents have remained static at £400 per sq ft.
The figures, contained in a new report by commercial agency Colliers CRE, will come as a particular blow to Liverpool One, which originally aimed to charge around £350 per sq ft.
The report claims that retail landlords across the North West are doing loss-leading deals to let units, rather than see them stand empty in the recession.
The firm’s latest Midsummer Retail Report shows that many high street and shopping centre landlords are doing “below market” deals with retailers, rather than suffer the even more financially damaging prospect of empty premises.
And incentive packages that include rent-free offers of two or three years and even longer are increasingly commonplace as landlords look to find tenants for empty shops.
The report forecast that North West retail rents would fall by 13.1% in 2009 and by 7.6% in 2010, compared to by 14% this year and by 9% in 2010 nationwide – so the region’s rents are holding up better than the national average.
In 2008-09, there were no increases in retail rents in the region because of the recession.
Nick McAllester, head of retail agency at the Manchester office of Colliers CRE, said: “This year, the realisation that we are in a full- blown recession has caused many landlords to see that the cost of leaving units vacant is more detrimental to their investment values than the negative impact of doing “below market” deals.
“While, just nine to 12 months ago, many landlords were holding out for deals which would not negatively impact values, today income – even very short-term income – is seen as key.”
Mr McAllester said the increasing willingness to offer “soft” deals to lure occupiers – to “put bums on seats” – had seen more and more flexible lease terms, including turnover-based rents – where rent is based purely on a percentage of the occupier’s turnover or a low base rent plus turnover provision.
This, along with the large incentives packages available, has caused a “significant decrease” in net effective rents.
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