Shopping centre landlords face long road back

Shopping centre landlords are facing a hard month in which the value of their portfolios is expected to drop by billions of dollars.

Retailers have told The Australian that shoppers are pouring back into malls

Shopping centre landlords are facing up to a hard month in which the value of their port­folios is expected to drop by billions of dollars with more bad news to come even as shoppers return to malls.

Retailers have told The Australian that shoppers are pouring back into malls, particularly in outer-suburban locations, but concerns remain about this influx once the short-term stimulus wears off.

The falling values of malls are also causing big problems for their owners and lenders, with retail property stocks down heavily on Wednesday after GPT sliced the value of its retail holdings by close to $500m.

Vicinity Centres fell 5.42 per cent to $1.745, Scentre Group had a 4.4 per cent fall to $2.61, and Stockland was off 4.4 per cent at $3.91.

GPT fell 2.19 per cent and Mirvac dropped by a 3.1 per cent.

Colliers International noted the severe impact on the sector, but argued that centres could turn around by offering a wider range of services. But getting back on track after the corona­virus crisis could be tough.

About 70 per cent of landlords had 60 per cent or less of their tenants trading and a similar proportion of landlords expect vacancy levels to increase over the next 12 months.

About 72 per cent of landlords reported that 45 per cent or more of their tenants had applied for rent relief, and almost half their tenants had asked for rent holidays, either over the shutdown or to extend beyond this period.

Half of landlords had offered their tenants a mix of rent holidays and deferrals and almost three-quarters expect rents to fall in the next 12 months.

They cited cafes and restaurants and beauty services as the hardest-hit sectors, with apparel also “significantly affected”.

Although apparel retailers were not mandated to shut, a significant proportion decided to close temporarily.

The Colliers International analysis showed that of retailers that had not been mandated to close but did, 77 per cent of them were fashion retailers.

“This accounted for over 7200 fashion stores closed which is approximately 1 million square metres of retail space,” the firms said.

Colliers International head of retail Michael Bate and director of research Kate Gray said the COVID-19 pandemic had accelerated the market penetration of the e-commerce sector.

About 20 per cent of growth had been driven by users who have never made an online purchase before and online shopping jumped by 20 per cent in April on a year earlier.

While they said there was significant growth in the omnichannel model for retailers, that requires an integrated bricks-and-mortar presence, and they anticipated the rise of dark stores for click and collect orders only.