Retail Rents

Posted At: 23 June 2008 17:00 PM
Related Categories: Retail Property

The Colliers CRE Midsummer Report was issued last week and reports that “in real terms rents have fallen by 3.1 per cent since the early 1990s”, whilst also highlighting a fall in the amount of new shopping space in the pipeline.  I am somewhat sceptical of calculations based on “Constant Prices” – the weightings used to translate from current to constant prices are inexact.  For example, the deflation of the price of electronics is based on the idea of comparing “like-for-like” products.  In an area of very rapid technological advance this means comparing what is now mainstream with what at the time was highly specialist.  Within the context of shop rentals, traders pay for access to target customers but rents are proportional not just to the number of shoppers passing the shop but also to the time they are in front of it (for which the length of frontage is a surrogate measure).  As retailers make better use of their shop space (the advent of flat screen televisions has dramatically reduced the space required by electrical retailers) and their shop frontages, they require less overall space.  So, they now do not require the same space as 20 years ago to make an equivalent impact on shoppers.

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