Discounting looms in tough times for retail
In this year's reporting season, the average comparable sales growth from specialty stores, as reported by the landlords, just broke even with inflation. For Westfield it was about 0.6 per cent, while for CFS Retail it was about 2 per cent, with cinemas and retail services (hairdressers and mobile phones) were up and department stores down.
The Bureau of Statistics shows retail trade rose by just 0.1 per cent in July after a flat result in June. Annual spending growth rose from 1.1 per cent to 1.9 per cent. However, over the past five months spending growth is running at an annualised minus 1.2 per cent.
But all the major owners said the leasing of new shops had seen a drop in rents of up to 10 per cent in the past six months.
Analysts say retail owners with food-anchored centres would be the better performers as consumers shun apparel.
Deutsche Asset and Wealth Management's Asia-Pacific real estate strategic outlook says it continues to be a tenants' market, with retail landlords keen to maintain high occupancy within their centres at a time when new inquiry has been subdued.
Tenants favour better managed centres with a clear marketing plan to help attract shopper traffic. "As such, landlords have been flexible in their rents with many offering better incentives, including rent-free periods and contributions to fit-outs," the report says.
Frequently Asked Questions about this Article…
Discounting is expected to rise because retail sales growth was essentially flat in June and only rose 0.1% in July, and an unseasonably warm start to spring has softened demand—forcing tenants to use discounts to drive sales, according to the article.
The article says average comparable sales growth from specialty stores essentially only kept pace with inflation. Reported results included about 0.6% for Westfield and about 2% for CFS Retail, with cinemas and retail services (hairdressers and mobile phones) up, while department stores were down.
The Bureau of Statistics showed retail trade rose just 0.1% in July after a flat June, and annual spending growth moved from 1.1% to 1.9%. However, over the past five months spending growth has been weak, running at an annualised minus 1.2%, per the article.
Yes. Major retail owners reported that leasing of new shops has seen rents drop by up to 10% in the past six months, according to the article.
Analysts quoted in the article say food-anchored centres are likely to be better performers, because consumers are shunning apparel and are still visiting centres for food and convenience-led services.
The article cites Deutsche Asset and Wealth Management saying it continues to be a tenants’ market, with retail landlords keen to keep high occupancy while new leasing inquiry remains subdued.
Landlords have been flexible on rents and are offering better incentives to attract tenants, including rent-free periods and contributions to fit-outs, as well as more attractive lease terms, according to the article.
The article notes tenants favour better-managed centres with a clear marketing plan to attract shopper traffic, so investors should watch centre management quality, marketing activity, occupancy levels and tenant mix (for example, food-anchored tenants versus apparel).
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