The Covid-19 crisis has impacted many parts of the retail industry, and while many retailers are feeling the brunt of the pandemic, landlords are not without their own struggles.
Vicinity Centres announced on Friday a net valuation decline of 11.3 per cent across its 60-property portfolio worth $1.79 billion, with its CBD, DFO and flagship at Chadstone falling 8.8 per cent.
To Grant Kelley, CEO and managing director of Vicinity, the results show the resilience of the business, with a portion of the decline caused by rental assistance and waivers.
“It is important to note that retail property is one of the few industries where partial rent waivers, not just rent deferrals, are being offered to impacted businesses, notwithstanding legal obligations under leases,” Kelley said.
“Vicinity is undertaking these actions to support the long-term sustainability of the retail industry…. [and] any reductions in discretionary retail spending and lower retail activity may continue to have an adverse impact on the valuation of Vicinity’s assets.”
And while much of the business community has been through an economic shock in the last few months, NAB’s quarterly business survey found that confidence in the retail sector had increased over the second quarter – a sign that confidence had already troughed and was potentially rebounding.
However, NAB chief economist Alan Oster warned that while confidence has started to recover forward looking indicators are pointing to very weak outcomes going forward.
“Confidence was only slightly weaker reflecting the fact the outlook for a number of industries such as retail and wholesale were already improving by the time of the survey,” Oster said.
“[However], there will need to be a substantial recovery in activity economy wide before we see a full recovery in conditions and confidence.”
And, given the sheer hit to the economy and the business sector in Q2, it will take some time for that activity to return to normal levels.
Any confidence that returned in Q2 is fragile, Oster said, since uncertainty in the business sector remains – elevated due to the lockdown in Victoria and spike in cases around Australia in recent weeks.
As such, it is clear the economy will continue to require ongoing policy support, such as JobKeeper and JobSeeker – a position the Government committed to take in Thursday’s economic update.