Which retailers fell behind on rents last year? Theatres, gymnasiums and Victoria’s Secret
(The real deal) – The pandemic has pretty much ceased to be an excuse for retailers to skip rent.
Recoveries from domestic tenants last year were 94%, on par with 2019’s 96%, according to a report by Datex Property Solutions. Recoveries from non-domestic tenants were 85%, down three points from 2019.
The chain stores in Datex’s survey all rent 10 or more locations or have a minimum gross monthly rent of $250,000. The report does not take into account rent relief from landlords.
Despite the high overall recovery rate, some tenants were exceptions.
Cinepolis, for example, paid just 25% of rent last year and Regal Cinemas just 54%. Overall, theaters only paid 66% of what they were owed, down from nearly 100% in 2019. The missed payments reflect a brutal second year for theaters, which saw attendance plummet as the home streaming has skyrocketed. Learn more
Theaters also saw gross rent as a share of sales skyrocket from 16% in 2019 to 49% in 2021, as sales per square foot fell from $144 to $55.
“Sales are like oxygen. The more sales I have, the more opportunities I have to breathe, but ultimately I have costs that eat away at those sales,” said Mark Sigal, CEO of Datex Property Solutions.
Fitness centers have also had a year of decline, with customers turning to home or outdoor workouts to avoid Covid and mask policies. Boca Raton-based chain Orangetheory Fitness made 73% of the payouts while LA Fitness paid 87%. Overall, fitness providers were at 85%, down from 94% in a normal year.
Although department stores have managed to pay their rent – with a category at 96% – their occupancy costs have fallen from 3% of sales in 2019 to 8% last year. Again, it’s not because rent went up, but because sales per square foot fell from $281 to $183.
Others withheld rent for no apparent reason, including Victoria’s Secret, which only made 74% of its payments, and Sephora, which made 84%.
As 2021 progressed, some retailers improved their payouts as sales increased. In the first quarter, hair salons saw sales per square foot drop from $265 to $196. However, in the fourth quarter, sales per square foot had increased by $10 to $271. As a result, collections went from 79% in the first quarter to 97% in the fourth.
Some retail categories had a strong 2021, even beating 2019 numbers. Homewares, for example, saw occupancy costs drop from 9% of sales to 7%, with sales per square foot dropping from $245 to $491. Sporting goods and supermarkets also saw an improvement.
Forty-seven percent of new leases last year included rent hikes, with those rents rising an average of 17 percent from 2019 levels. Another 28 percent saw their rents drop, on average 15 percent. Renewal rates were up from before the pandemic, with 64% of those who could renew doing so, up from 59% in 2019.