Retail sector tipped to lift

Lower interest rates and the more positive outlook for housing are tipped to flow through to the retail sector, particularly bulky goods and furnishing suppliers.

Morgan Stanley economic strategists say non-food retailers will benefit from improved confidence as house prices rise.

"We think that there is a two-pronged impact from a firming housing market: (1) improved consumer confidence; and (2) 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' report said this would have a flow-on impact to 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."

The more positive outlook comes as retail property faces a hectic round of new construction.

CBRE's latest report says an unprecedented 32 million square metres of shopping centre space is under construction across the world, representing a 15 per cent increase year on year (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 (16.8 million square metres).

"Seven of the 10 most active development markets globally are in China. These include Chengdu (2.9 million) and Tianjin (2.1 million), with Shenyang, Chongqing, Wuhan, Guangzhou and Hangzhou due to deliver over 1 million square metres over the next three years," the report says.

Head of Australian research at CBRE, Stephen McNabb, says Australia has a mature consumer sector, which means local activity appears stifled relative to the significant activity in Asia where the consumer sector is developing.

"Within Australia, in some cases development is being driven by the need to rejuvenate and 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 reflected the relatively stronger performance of the Victorian economy and retail sector since the GFC, driven by population growth.