Optimistic outlook for shopping centres

Optimistic outlook for shopping centresAccording to the latest m3property Shopping Centre report, the outlook for shopping centres in Australia is cautiously optimistic, with a rebound in consumer confidence expected to support retail sales growth and leasing demand into the future.The Spring 2014 report, which focuses on retailer and investment activity in regional, sub-regional and neighbourhood centres throughout Australia, predicts that shopping centres generally will experience mixed conditions over 2014-15 as a result of residential market and employment conditions differing across regions. The report states that low interest rates are likely to continue to bolster purchaser demand, while structural and cyclical changes will continue to challenge retailers, driving them to adjust their strategies and business models. It finds that investment demand remained strong over 2013-14, with owners increasingly likely to hold assets thanks to improvements in trading conditions,, resulting in a slowing of sales activity. Demand is expected to remain solid over 2014-15 on the back of increasing superannuation contributions, improving market conditions, the low cost of capital and greater availability of finance. Yields have tightened over 2013-14 and further compression is expected. The report also states that key retail tenant demand drivers showed improved results over the year; however, rental growth was lacklustre at 2.7 per cent and occupancy costs remained relatively high. An increase in consumer confidence remains the key to ongoing retail sales growth and leasing demand. Though fragile recently, it is expected to rebound as a result of low interest rates, increasing levels of wealth (largely due to rising house prices), a lower Australian dollar and a gradual transition to non-mining sectors. With the federal government forecasting household consumption to grow by 2.5 per cent in 2013-14 and increase to 3.0 per cent in 2014-15 (Economic and Fiscal Outlook, 2014), retail trade should be one of the main beneficiaries. To download a copy of the m3property Shopping Centres report, go to: http://www.m3property.com.au/wp-content/uploads/2014/09/National-Retail-Centres-report-Spring-September-2014.pdf