The paper from S&P Global Ratings has noted the fallout from COVID-19 has hit the credit quality of REITs amid unprecedented structural disruption.
Landlords have used various strategies to protect their credit quality, including equity raisings, dividend cuts and reduced capital expenditure.
But S&P Global Ratings credit analyst Rhys Corry has warned the fallout from the virus will “linger beyond lockdowns for rated retail REITs around the world” and lower rental collections during the coming months.
The structural pain is anticipated to be prolonged, buffeted by increasing adoption of e-commerce and changing consumption patterns.
“For Australian and New Zealand retail landlords, revenues plunged over the past few months as stores were shuttered and tenants were unwilling or unable to pay their scheduled rents,” Mr Corry said.
While online shopping has existed as a threat for some time, the report noted until the recent COVID crisis, it had been a slow burn. The level of e-commerce sales as a proportion of in-store retail had remained well below other markets such as China, the UK and US.
The COVID pandemic was reported to have fast-tracked growth in online sales, applying more pressure to retail landlords.
