CoStar: Retail rents will fall as much as 15% in 2020

Some retail shops, restaurants, fitness centers, and movie theaters that survive the pandemic panic may be paying much lower rents in the coming years.

CoStar, the commercial real estate research group, predicts that conditions put into play by COVID-19 will cause retail rents to plummet 13% to 15% year-over-year in 2020. The company’s April forecast had also predicted a steep drop, but a much lower one at 8% to 13%.

“The big thing that influenced our call this month is all the vacant space. At the beginning, when all the temporary closures started, retailers weren’t announcing permanent closures the way they did before,” said CoStar consultant Robin Trantham. “Now, in the last couple of weeks, we have a number of permanent closures by J.C. Penney and we have Pier 1 liquidating.”

CoStar puts its forecasts together with data gathered from a wide range of landlords and then incorporates employment trends and demographic data.

“How centers will perform in the next six months will be about how comfortable people feel going to a mall and being surrounded by other people,” Trantham said.