Tenancies Legislation could hurt retail property

Proposed changes to the Victorian retail tenancies act could have a negative impact on the sector if the review is not amended before this is enacted, warns Property Council Victorian executive director Jock Rankin.

"If the review (of the act) is not amended, then investors could be put off investing in Victoria," he says.

The Victorian Government has been conducting a review of the act after pressure from smaller retailers regarding leases in shopping centres.

Rankin believes a balance can be struck between the shopping centre managers' requirements and a fairer deal for the smaller tenant in those centres.

"We need to create an environment where the landlord and tenant prosper," Rankin says.

One area of concern in the review is that commercial premises such as office buildings with retail on the ground floor are included in the proposed changes to the act.

The Property Council is opposing this change, arguing that the New South Wales model (which excludes office developments) should be adopted.

"These changes could damage investment by LPTs and superannuation funds in Victorian retail property," Rankin says. "Getting the issues right is crucial for the long-term viability of the (retail property) industry."

Investors in retail property also face another dilemma this year. When turnover of retail sectors have been reported in the past, the Australian Bureau of Statistics has included wholesale sales tax in turnover figures.

In the post-GST era, this tax is now included in the ABS figures, but excluded by retailers when reporting sales to landlords.

"For the first time in Australia, the amount being spent by consumers, and being reported as spent by the ABS, differs from the retail sales reported by retailers to landlords," says Tony Dimasi, managing director of Jebb Holland Dimasi.

The danger of data being reported under different criteria will mean there is no one benchmark and investors will need to check which figure is being quoted in documents such as a syndicate prospectus.

GST has given the retail sector a rollercoaster ride, says CB Richard Ellis head

of research Kevin Stanley.

In 1999 retail turnover in Australia showed 6 per cent growth. This slumped to 1.5 per cent in 2000 and in 2001, retail growth is expected to creep up to 3.75 per cent, Stanley says.

This growth will only come from certain sectors of retail, he warns. GST has hit department stores, clothing and household sectors badly. In the second half of 2000 these sectors suffered an average 15 per cent drop in sales.

With some sectors of retail performing poorly, rents are also expected to take a battering in most capital cities.

Sydney is expected to see a -3.25 per cent drop while Melbourne will enjoy a modest 0.97 per cent growth.

The only capital city that shows strong retail rental growth is Adelaide (15.6 per cent).

Stanley says 2001 "is a year of recovery for the retail sector, with regional centres predicted to be the top performers".