Retail in a lumpy recovery

With only just over a week to the end of the 2013 financial year, retail tenants and landlords will be hoping the new year brings in better conditions.

The end-of-season sales and heavy discounting appear to be working in some areas, with consumers spending more than saving.

The opening of more international labels and a revamp of some stores in parts of Melbourne's central business district will make the sector more attractive to shoppers.

The rise in demand for electronics - tablets and phones - has created a new class of tenants and agents are now scouring all capital cities for new stores for Sony, Apple and Samsung, as well as the traditional carriers, Vodaphone and Telstra.

According to the latest Commonwealth Bank business sales indicator, economy-wide spending grew by 1 per cent in trend terms in May, after a 1.2 per cent lift in April and a 1.1 per cent gain in March.

The chief economist at CommSec, Craig James, said retailers had reason to be more confident, and despite the recent fall in the Aussie dollar, it was still a case of keeping prices lower to attract customers and prevent them flocking to overseas websites.

"The economy is improving off a low base. However, the recovery is still fragile," he said.

"An ongoing improvement in confidence is necessary to support activity levels, and the perception of lower interest rates will certainly support sentiment."

According to retail stock analysts at Deutsche Bank, while there has clearly been some deterioration in consumer sentiment since earlier in the calendar year, they believe this has been overstated given the weather-related drag on apparel sales (notably non-weather-affected categories have been better).

"The May federal budget announcement also weighed on sentiment and while conditions are likely to remain lumpy, we expect a gradual improvement given the positive signs in the property market and the recent interest rate cuts," the analysts said.

In the Australia retail marketview from CBRE for the first quarter of 2013, it says a more stable economic outlook was helping to boost consumer spending levels, driving modest growth in the retail market as a result.

The report says that despite subdued rental growth in the first three months of the year nationally, sales and investment activity was heightened during the period - particularly in the eastern states.

In turn, this is driving up demand for the bricks-and-mortar shopping centres.