Retail Rent Collections Increased in July

Retail rent collections increased in July compared to earlier months during the pandemic. According to data from Datex Property Solutions, retail rent collections were 68.8% in mid-July, a 14.7% increase compared to mid-June and a 36.6% increase compared to mid-May. The increase in rent payments was likely due, at least in part, to the initial re-opening of the economy as well as retailers learning to serve customers in the new market.

“As we have gotten our arms around how to re-open the economy in the face of an active pandemic, more retail categories have been able to return to partial or full operations,” Mark Sigal, CEO of Datex Property Solutions, tells GlobeSt.com. “This has enabled more retailers to generate income, and as we know, income is the oxygen needed to pay rent.”

In addition to restrictions lifting, retailers also could put PPP money into action, and we started to see the benefits of that in July. “Landlords have worked closely with retailers to help them secure PPP loans and in tandem, negotiated a lot of rent relief agreements, which has provided a backstop for retailers to bridge the storm, so to speak,” says Sigal. “Three, as landlords have gotten access to reports like ours, it’s become clear which operators in which categories are paying, and which of their peers have been choosing not to pay. This has led to more landlords to pursue legal action on those tenants not paying their share, so it’s been a combination of macro economy, some carrot and some stick.”

The question now is, of course, will rent collections continue to increase, or will the re-closure in some states and the surge in positive COVID cases negatively impact rents once again. “This is the great unknown in that certain retail categories, like apparel, gyms and movie theaters, have a much thinner needle that they can thread than say supermarkets and fast food operators, who are navigating the environment reasonably well,” says Sigal. “My general sense is that there is more pain ahead, but that that pain may already be factored in, given that collection trends remain 10-20% below historical averages.”

Retailers at different ends of the spectrum will also likely act differently. Mom-and-pop retail stores will have more challenges than credit tenants. “I believe that the national tenants that have stronger balance sheets will continue to pay, as the promise and hope of getting to the other side of the pandemic feels closer now with vaccines beginning to enter human trials,” says Sigal. “That noted, there’s plenty of walking wounded retailers, and things can change quickly. After all, in just three months 24 Hour Fitness went from a perennial 100% rent payer to bankruptcy.”

Even in July, there was a bifurcation between mom-and-pop and national retailer rent collections. “We are seeing a nominal difference between National Tenants and Mom and Pop Tenants, but not as extreme as you might think,” says Sigal. As of July 15, the delta between the two is <2%.”