US retail rents becoming unviable says Gap real estate boss

US rents are reaching a level where the “wheels are about to come off retail”, according to Gap Inc executive David Zoba.

Zoba, SVP of global real estate and store development, warned mall operators that rent levels were fast becoming unsustainable at many US retail locations, he told delegates at the National Retail Federation (NRF) Big Show in New York.

Speaking during a panel debate, Zoba said that the evolution of omni-channel retail will have a profound effect on the way brands do business in the future.

He cited the announcements of a series of store closures by retailers in the last two weeks including store closures at J C Penney and Macy’s.

Zoba said he was an avid follower of the spread rent renewal rates which had seen a double digit escalation for the past 12 quarters.

“We’re reaching a rental level as a percentage of sales that if it continues, will cause the wheels to come off for a lot of retailers,” he predicted.

Zoba added that while there were many centres where brands needed to be there were many more that were “just not great”. Rents demanded at those, he said, no longer constituted a viable business proposition for a lot of retailers.

• Kip Tindell has been named chairman of the National Retail Federation and chairman of its executive committee. The chief executive of the Container Store succeeds immediate past chairman Stephen Sadove, the retired CEO of Saks Fifth Avenue. Tindell and vice-chairman Mindy Grossman will work alongside NRF CEO Matthew Shay.

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