Retailers seek rent reductions instead of better marketing, consultant says

“Some retailers really have problems, while others are just trying to take advantage of the situation and press for better conditions,” said Andrei Vacaru, retail consultant at JLL Romania. Retailers are pushing for benefits such as a year rent-free, but only developers in a distressed situation themselves would offer such benefits, he went on. While most owners are open to helping retailers, those in a better market position are reluctant to give big rent reductions. “Without stable rents, it is difficult for developers to continue their activity,” said the consultant. “Retailers are rushing to ask for rent reductions, although sometimes they should instead seek better marketing for their project, which would help them improve their sales.” Retailers are nowadays less willing to provide the same guarantees to developers as they did before. “Tenants are asking for turnover rents nowadays,” said Vacaru. This impacts developers, as the retailers' sales are at lows. However, a developer needs a much higher level of pre-leases in order to secure bank financing nowadays than in the past, he added. Although companies have announced that around 100 retail projects will be constructed across Romania in the next couple of years, only a few of them are actually being built. Moreover, “this year almost no new development projects have been announced. We have seen developers leaving the country or simply stopping investments,” Vacaru observed.
Corina Saceanu