This recent report focussed on retail
property trends and identified that shopping centre incomes were protected to
some extent by automatic fixed rental escalations of around 4%. “The problem is that if rent
is going up by four per cent a year but turnover is growing by less than that,
occupancy costs rise,” says a BIS Shrapnel spokesperson. “Specialty shop
occupancy costs are at an all-time high. They are unsustainably high for some
tenants.”
Those costs are leading occupants to either not renew
at the end of the lease or demand a cut in rent to stay. If they leave, the
incoming tenant is achieving a more attractive offer, in a combination of lower
rent and/or leasing incentives. “There’s widespread evidence of slowing centre
income growth as a result”. 
