What factors matter in rent negotiations? Differences in views between landlords and retail trade tenants

Abstract

ABSTRACT This paper investigates differences in the views of rent negotiating landlords and retail trade tenants regarding the importance of various factors in their rent negotiations. The paper explores whether these actors’ expectations are forward or backward looking as economic activity is increasing after the COVID-19 pandemic. Also, their different levels of trust in institutions, and in their counterpart as organisation and individual, are analysed. The study uses a web-based survey, gathering responses from some 100 landlords and tenants in the Swedish retail sector, and logit regressions. As demand increases after the pandemic, indicating a possibility to increase rents, the study finds that landlords are forward looking at this stage of the business cycle as regards industry developments, while tenants are backward looking or more focused on current contractual rents. Tenants focus more on vacancies and property value, which are set under pressure due to structural changes such as increased use of e-commerce and changes in working habits after the pandemic. Landlords show a higher level of trust in their counterpart as an individual than do tenants. This study contributes to an increased understanding of rent negotiations in two sectors – property and retail – that are facing structural challenges and difficulties in the wake of the pandemic.