Most Retailers Have Now Struck Agreements with Landlords on Back Rent

Retailers have struggled to pay rent through the pandemic, and as a result, the retail market has been among the sectors with the lowest rent collections in the commercial real estate. In June, one-third of retail tenants had paid 75% of rent, but in July, that number doubled, with two-thirds of retailers paying only 65% of rent, according to a retail survey conducted by NRF and PJ Solomon.

The low rent collections aren’t surprising, considering that so many retailers were forced to shutter during the pandemic. At the peak of the pandemic, 73% of retailers had to close their doors during the pandemic, including locations in malls and shopping centers.

While back rent is accumulating, most retail tenants have already come to an agreement with landlords to repay any accumulated rent debt. In fact, only 10% of respondents to the NRF and PJ Solomon had not yet reached an agreement with landlords to repay rent. On the other hand, 73% of retailers said that they plan to repay at least half of back rent, and 50% of retailers responded that they had received some form of rent relief from landlords.

While retail rent collections are low, some data outlets have shown stronger rent collections today compared to at the start of the pandemic. Datex Property Solutions found that retail rent collections increased to 68.8% in mid-July, a 14.7% bump compared to mid-June and a 36.6% increase compared to mid-May. Partial reopening measures have helped to drive rents in some markets. In addition, retailer agreements with landlords have helped to increase rent payments.

From the other side of the table, landlords also believe that retailers should receive some assistance through the pandemic. According to the NRF and PJ Solomon survey, 67% of respondents said that retailers that have seen an economic impact from the pandemic should receive three months of assistance. In addition, owners believe that rent forgiveness programs should help to protect tenants from credit loss issues.

However, owners were clear that assistance programs should be reserved for tenants suffering financially from the pandemic and tenants that can prove an impact, including shuttered business, layoffs and furloughs. Half of respondents agreed that this should be a baseline for the rent assistance programs.

The size of a retail tenant also plays a role in rent relief. For example, earlier in the pandemic, NewMark Merrill Co. said that it is focused on providing assistance to small mom-and-pop tenants rather than large credit tenants, which have access to the capital markets. The retail investor has more than $2 billion in assets in California, Colorado and Illinois, and that it gave preference to smaller tenants because it only had so much relief to go around.