Major retailers a challenge for shopping centre landlords
Major retail landlords are coming under pressure from the sluggish performance of anchor tenants, which are dragging on overall complexes even as some areas hold up.
It comes as a raft of retailers, including Myer and David Jones, are cutting their floorspace.
Research by Macquarie Equities across 37 major retail groups, analysing income statements, has revealed cost-cutting in stores is weighing on the bottom line of retail landlords.
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The analysts reiterated their “underperform” recommendation on Scentre Group, owner of the local Westfield empire; Vicinity Centres, which co-owns Chadstone; and Stockland, which owns shopping centres across the country.
The report found shopping centre vacancies continue to rise, with regional mall vacancies at 2.2%, the highest since 1998, and subregional vacancies hitting the highest on record since 1993 at 4.8%.
Meanwhile, earnings margins for shopping centre anchor tenants — such as supermarkets, department stores and discount department stores — had moderated by between 160 and 330 basis points, from the 2015 to 2019 financial years.
Specialty and mini-major shops were more stable, with EBIT margins broadly static over the same period.
Problems including growth in competition, increasing online sales, and a lower value for the dollar were driving an environment of cost-out programs and “space optimisation” plans that included lower rents and less floor space.
Despite three Reserve Bank rate cuts and tax rebates, pressure has increased on the retail sector within the past six months.
Retail sales contracted 0.1 per cent in the September quarter, bringing the annual growth figure to minus 0.2% — the first annual contraction since 1991, according to seasonally adjusted figures released by the Australian Bureau of Statistics.
Last week, Premier Investments chief executive Mark McInnes said landlords were offering better rental deals to foreign chains than Australian retailers and in the process were “killing Australian jobs”.
On Wednesday, shares in major retail property owners followed the market to close lower.
This article originally appeared on www.theaustralian.com.au/property.
