The Deloitte report says real retail turnover growth is expected to slip from 2.2 per cent in calendar 2018 to a more modest 1.6 per cent growth in 2019, before lifting back to 2.2 per cent growth in 2020.
It says the willingness of households to forgo savings for spending will come under pressure as the housing market moderates.
But it predicts much of the retail pain will be felt in 2019, with a stronger outlook for 2020 as income growth strengthens and housing markets stabilise.
Deloitte Access Economics partner and Retail Forecasts principal author, David Rumbens, said Australia’s retail sector had been sustaining a reasonable rate of sales growth in an unconventional way – not so much from income growth, but leveraging off consumers’ willingness to spend.
But he said as the “wealth effect” diminishes, “it provides a fairly strong incentive for people to be more prudent with their cash”.
“That leaves 2019 as retail’s gap year – nursing a hangover before getting ready to move ahead in a year’s time,” Mr Rumbens said.
Despite concerns of weakening sales, Chadstone retained its top spot with turnover of $2.1 billion, followed closely by Scentre’s Westfield Sydney at $1.9 billion, in the Big Guns survey.
The Vicinity Centres and Gandel-owned Chadstone in Melbourne became the first centre in the country to reach the $2 billion mark – exactly 10 years after it became the first to achieve the $1 billion milestone. Its turnover of $2.135 billion showed a 10 per cent increase on last year’s figure.
But it is GPT”s Melbourne Central that has risen in the ranks to be the most profitable on a sales-per-square-metre measure, narrowly knocking off the long-standing Broadway Centre, Sydney, owned by Mirvac.
According to the retail sector’s stalwart Shopping Centre News‘ Big Guns survey, Melbourne Central had a 12 per cent rise in sales per sq m to $14,763. Broadway stood at $14,405 per sq m and had held the top spot for the past six years.
Looking at specialty stores, the sales per sq m for all shops with an area of less than 400 sq m, saw Westfield Sydney take top honours with $23,389 per sq m, a 5.4 per cent increase on last year.
Big Gun centres are those with a gross lettable area (GLA) in excess of 50,000 sq m that contain one or both of the major department stores, Myer and David Jones, along with discount department stores – Big W, Kmart and Target. Most have both major supermarkets, Coles and Woolworths.
The 81 centres comprise a total GLA of 7.4 million sq m and accounted for $46.4 billion in retail sales during 2018.
In what many analysts have described as a horror year for bricks-and-mortar retail – with falling house prices, increased competition from online retail, stagnant wage rises, and a fall in consumer confidence – SCN’s publisher, Michael Lloyd, said “these Big Gun centres have performed remarkably well”.
“Our shopping centres are more than just places for buying stuff; they’re community focal points, places of social interaction. They are integral parts of our community infrastructure and we develop, lease, manage and market them in line with that definition,” Mr Lloyd said.
“As such, they are, more than any other entity, totally reflective of the performance of the nation as a whole, its economic success and its future. It’s why they’re the target of global pension funds, sovereign wealth and the major private equity funds.”
Carolyn Cummins is Commercial Property Editor for The Sydney Morning Herald.