Dive Brief:
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Luxury retailers are paying top rents in the U.S., a reflection mostly of their store locations. But they also enjoy high sales productivity thanks to their generally high prices, according to an assessment of U.S. retail rents by Cowen & Co. analyst Oliver Chen commissioned by CNBC.
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On the other end, retailers with stores away from malls enjoy much lower rents, and usually have price tags to match, Chen found. The real winners in Chen’s report are T.J. Maxx and Ross, which are usually in strip malls that offer the lowest rents.
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Big boxes like Target, Costco, and Wal-Mart had the most appealing rents as a percentage of sales, followed by department stores Macy’s, Nordstrom, Kohl’s, and Hudson’s Bay, Chen found. And those paying the most rent as a percentage of sales were specialty stores like Abercrombie & Fitch, Gap, American Eagle, Kate Spade, and Michael Kors.
Dive Insight:
Few surprises here, but you have to love the secret sauce of retail rent enjoyed by T.J. Maxx.
There’s value in good locations like swanky streets or malls, but retailers will pay higher rents, which in turns takes a toll on margins. And those in less desirable locations will enjoy sweet rents, but maybe not the sweetest traffic. The trick is to keep those sales humming — T.J. Maxx is the example of a retailer that has enough appeal for customers to hoof it to their out-of-the-way locations, which are much less expensive to pay for.
