DESPITE the difficulty obtaining funding and the worry of rising interest rates, the outlook for retail property is improving.
Jones Lang LaSalle's head of retail, Tony Doherty, said recent presentations by strategic retailers Hairhouse Warehouse and Retail Food Group were mostly upbeat.
Hairhouse, a one-stop shop for hair products, remained keen to expand its 120 sites in shopping centres to 250 in the next few years. ''They are in demand from landlords and developers,'' he told BusinessDay.
Mr Doherty said RFG, whose brands include Donut King, Michelle's Patisserie and Brumby's Bakery, was more circumspect. RFG opened 80 stores in all brands in 2008, but only 60 last year. ''Finance is still hard to get. Due to the global financial crisis, many major owners of shopping centres froze their refurbishment plans,'' he said.
Mr Doherty said retailers' deals involved more flexibility. If they could not get funding from the banks, they asked for more incentives from landlords, such as help with shop fitouts.
''In 2010 and beyond, they (RFG) want to get back to where they were in 2008. Their sales are not in decline - they have marginally increased. The company has greater confidence in the Australian economic outlook, employment is in better shape than feared and the high Australian dollar, by making imports cheaper, has enabled them to hold their margins,'' he said.
But retailers remained wary. ''Interest rates are a deterrent,'' he said.
Mr Doherty said in Melbourne, food-based shopping centres had traded better than average. When the big developers stopped building shopping centres because they could not get the cash, Coles and Woolworths went ahead and secured sites they would develop themselves. ''However, they will not be long-term holders,'' he said.
There was also evidence that Myer and David Jones customers did not like the disruption that renovations in their flagship city stores were causing. ''Both DJs and Myer have seen growth at Chadstone and Doncaster. Some CBD spending was exported to the suburbs. Getting that back will be a challenge,'' he said.
Rent growth in Melbourne retail last year was 1.3 per cent, below the level of inflation. But in regional centres, rents grew by 1.5 per cent and now averaged $1403 a square metre.
