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

Author

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  • Hermansson, Cecilia

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

  • Lundgren, Berndt

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

Abstract

This paper investigates the differences in subjective views of landlords and retail trade tenants regarding the importance of factors in their rent negotiations. It is explored whether expectations are forward or backward looking as economic activity is increasing after the pandemic. Also, the different levels of trust for institutions, and for the counterpart as organization and individual, are analyzed. The study uses a web-based survey, responses from some 100 landlords and tenants in the Swedish retail sector, and logit regressions. As demand strengthens after the pandemic, indicating a possibility to increase rents, landlords are forward looking at this stage of the business cycle as regards industry developments, while tenants are backward looking or focusing more on the current rents. Tenants focus more on the vacancies and the property value, which are set under pressure due to structural developments. Landlords show a higher trust for their counterpart as an individual than do tenants. The study contributes to an increased understanding of rent negotiations in two sectors facing structural challenges and difficulties due to the pandemic.

Suggested Citation

  • Hermansson, Cecilia & Lundgren, Berndt, 2022. "What factors matter in rent negotiations? Differences in views between landlords and retail trade tenants," Working Paper Series 22/9, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    • Handle: RePEc:hhs:kthrec:2022_009
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    More about this item

    Keywords

    rent negotiation; real estate landlords; retail trade tenants; forward-looking expectations; adaptive expectations; trust; logit regression; pandemic;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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