Retail development is defying the underlying trend of the overall sector, with more than $1 billion of sales and new projects completed in recent months.
While there is concern about the influence the internet is having on the retail sector, as well as low consumer demand for some apparel, the demand for property keeps rising.
Rents are still tipped to drop by up to 5 per cent for new leases in the coming year as a result of constant discounting and falling sales in the apparel sector.
This comes as a report from Commonwealth Bank analyst Andrew McLennan suggests online retail spending continues to increase faster at domestic retailers (up 16 per cent) than international retailers (up 9 per cent), changing the mix to 61 per cent/39 per cent, respectively, compared with 58 per cent/42 per cent last year.
The report says the bank's cardholders have continued to convert to online channels, but the pace is slowing. It suggests a saturation point is nearing for new online consumers. "We estimate that about 50 per cent of online spending growth is from existing customers shopping more frequently; this compares with about 33 per cent last year," McLennan said.
"The frequency of online transactions is becoming a more important driver of online spending, as consumers extend spending activity into new categories online."
But the head of retail, property and asset management at Jones Lang LaSalle, Tony Doherty, says despite growing concern over lower rents, retail development activity is increasing.
"The rising number of joint ventures in ownership structures in the Australian retail market will lead to further refurbishment and redevelopment in the sector," he said. "In the sub-regional and neighbourhood shopping centre categories, Coles and Woolworths have been active in developing centres to accommodate their growth plans.
"In the first quarter , 11 of the 18 retail projects to commence were anchored by either a Woolworths or Coles supermarket, or a Bunnings or Masters Home Improvement store," Mr Doherty said.
One of the larger deals was the recent $532 million joint venture struck between Coles and super fund ISPT.
The selling agent, the Australian head of retail investments at Jones Lang LaSalle, Simon Rooney, said the portfolio included 18 neighbourhood shopping centres and one sub-regional property.
"This latest joint-venture transaction in the sector is further evidence of a growing trend of capital partnering to unlock funds for future development," he said.
The Coles-ISPT deal follows the $371.4 million sale in February of a 50 per cent share in five retail assets (predominantly sub-regional shopping centres) on behalf of Federation Centres to ISPT.
Jones Lang LaSalle negotiated both deals and has an additional $1 billion of part shares in due diligence set to exchange in the coming weeks.
"These solid fundamentals have underpinned the resilient performance of neighbourhood shopping centres, resulting in increased levels of demand for exposure to these non-discretionary-expenditure-based centres by institutional investors," Mr Rooney said.