GPT Group is in the throes of a retail redevelopment program. In March, it opened the second stage of the $300 million Highpoint expansion in Melbourne, which is now fully leased. Customer visits have risen by as much as 40 per cent from Thursdays to Sundays.
And a $200 million upgrade of the Wollongong Central shopping centre is part of its active retail development program.
But the projects come at a time when retail remains under pressure, particularly in discount and department-store businesses.
The weakness will see a shift in demand for assets from the traditional department-store anchors to food- and supermarket-based properties. This was highlighted by the deal on May 1 by super fund ISPT, which paid $532 million to the Wesfarmers-owned Coles group for 75 per cent of 19 supermarkets.
More deals of this type are expected to be completed in coming years as the retail sector adjusts to the impact of online shopping.
In GPT Group's quarterly investor update on April 30, the group's head of investment management, Carmel Hourigan, said GPT's view was that the short-term outlook for retail would remain subdued.
"However, key growth drivers are improving," Ms Hourigan said. "In recent months, the impact of low interest rates has begun to wash through the economy. Since June last year, the sharemarket, house prices and consumer sentiment have been trending upwards.
"These sectors have helped to improve retail sales growth."
For the long term, Ms Hourigan predicts an improving retail environment and sales growth trending back to historic levels if stable gross domestic product is realised as anticipated.
At GPT's annual meeting on May 2, chief executive Michael Cameron told shareholders that structural changes across the market were likely to affect the shape of the property sector in the future.
"Trends such as the growth of online retail will see changes in the way consumers spend their time in shopping centres and will increase the importance of logistics hubs," Mr Cameron said.
He added that, in time, department stores might look to develop smaller stores that would give landlords, such as GPT, the opportunity to increase the number of speciality stores and drive greater value.
For the first quarter of 2013, GPT reported that the comparative total centre and speciality sales moving annual turnover (MAT) growth were 0.9 per cent and 1.3 per cent respectively - down from 1.3 per cent and 1.5 per cent in the first quarter of 2012.
GPT attributed the decline to a difficult base year given 2013 had one less day in February (2012 was a leap year) and two less business days in March because of Easter.
Apparel MAT, which represents 35 per cent of specialty sales, grew, while other positive sales drivers included retail services such as mobile telephones and food outlets.