Retail Landlords Facing Rising Vacancies

Bloomberg News reports that landlords have begun to waive rents and provide other perks to non-luxury names like Zara and H&M in an effort to prevent rising vacancies, as a boom in shopping mall construction amid cooling consumer demand threatens to flood the market with options for retailers:

Preferential leasing terms were reserved until recently for luxury brands such as Louis Vuitton and Gucci, which are coveted because they bring shoppers into malls. Now moderately priced labels are being enticed with offers as landlords work harder to fill shops, according to Cushman & Wakefield Inc. and RET Property Consultancy Ltd.

[…] Chinese developers built more malls and expanded into smaller cities as consumer spending and incomes grew, elevatingChina’s economy to the largest in the world after the U.S.

Half of the 32 million square meters (344 million square feet) of shopping centers under construction around the world are in China, according to CBRE Group Inc. (CBG) About 21 million square meters of retail space is expected to be completed by next year, a 38 percent increase in supply, according to broker Cushman, which tracks 20 cities in China.

That’s setting up a test for developers as retailers includingLVMH Moet Hennessy Louis Vuitton SA (MC) and Gucci-owner Kering SA (PP) respond to slowing growth by scaling back expansion plans in the world’s most populous country. [Source]

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