Major Australian real estate investment trusts (REITs) that hold retail exposure are well positioned to withstand pressure even after a number of national retailers recently entered administrations, Fitch Ratings believes.
Although this followed an extended period of subdued consumer confidence and retail spending, Aussie retail REITs were still relatively safe as retailers in Australia and would continue to seek better terms and rent reduction as part of negotiations on renewals or new leases following the spate of high-profile store closures.
According to Fitch, this may affect leasing spreads, which weakened over the past couple of years.
“Most of the announced store closures, nearing 200 in total, are in shopping malls across Australia, and will result in an increase in vacancies, including in centres owned by major REITs such as Scentre, Mirvac, Vicinity Limited (not rated) and Stockland Corporation Limited (not rated),” the agency said.
“We still believe that changing consumer preferences will drive the REITs to continue to partner tenants to maintain their leading positions in Australian retail.
“In particular, the REITs will need to keep adding value to tenants by providing a mix of stores, operators and experiences that will drive consumer footfall into the centres, and sharing information with retailers to help them tailor their offerings to the evolving consumer preferences.”