"Retail rents to drop by a fifth"

Says the headline on the front of the FT's Companies & Markets section.

This may seem surprising, seeing as retail sales might have only dropped by 5% or so overall (OK, they're down 100% at Zavvi, MFI and Woolworths, but they're up at the supermarkets), but this is because rents are just a balancing figure.

In round numbers, for £100 sales, the retailer needs to keep a net profit after rent and taxes (rents and taxes being more or less the same thing in practice) of £5, or else there's no point bothering. A typical retailer has turnover of £100 and spends £70 on staff and stock, so rents and taxes absorb £25, leaving the retailer with his net profit margin. If turnover falls by £5 and costs stay the same, the amount that can be absorbed in rents and taxes goes down from £25 to £20, i.e. down by a fifth, which is what the experts predict in the FT article.