House prices to build retail
Lower interest rates and a more positive outlook for the housing sector are tipped to flow through to the retail industry, mainly for suppliers of bulky goods and furnishing.
According to Morgan Stanley's economic strategists, low interest rates and stable macro conditions, which drive a stronger housing market, have positive implications for the Australian retail sector.
"We conclude all non-food retailers will benefit from improved confidence from rising house prices," the strategists said.
"We think that there is a two-pronged impact from a firming housing market: improved consumer confidence and an uptick in housing-specific categories such as furniture-furnishing, hardware and electrical.
"That said, we expect the uptick to be diluted by structural headwinds from online."
The strategists said this would have a flow-on impact on the retailers, which would help tenants and landlords at a time of flat rental growth and sales.
"To be clear, we don't expect retail sales to return to historical levels, amid the ongoing structural headwinds from online.
"Our analysis shows housing factors have the most significant impact on the furniture and flooring and hardware categories."
This more positive outlook comes as retail property is also hectic with new construction.
The latest report from CBRE says an unprecedented 32 million square metres of shopping centre space is now under construction around the world, representing a 15 per cent increase year-on-year (up from 28 million square metres in 2012).
The report says shopping-centre development activity is heavily concentrated in emerging markets, with China home to more than half of all the space under construction, at 16.8 million square metres.
"Seven of the 10 most active development markets globally are in China," the CBRE report says.
"These include Chengdu [2.9 million square metres] and Tianjin [2.1 million square metres], with Shenyang, Chongqing, Wuhan, Guangzhou and Hangzhou due to deliver over 1 million square metres over the next three years."
According to CBRE head of Australian research Stephen McNabb, Australia has had a mature consumer sector, which meant local activity appeared stifled relative to the significant levels of activity in Asian markets in which the consumer sector was developing.
"This is particularly evident in China, which accounts for seven out of the top 10 most-active development markets," he said.
"Within Australia, in some cases development is being driven by the need to ... expand facilities to maximise returns in a structurally softer retail-sales environment.
"We have seen some shifts in terms of where activity is taking place, with higher levels of activity in Victoria, compared to the larger Sydney market."
Mr McNabb said this likely reflected the relatively stronger performance of the Victorian economy since the global financial crisis, driven by much stronger population growth. Early in the 2000s Victoria's growth averaged 1.2 per cent, while recently it has been running at 1.7 per cent.