There are two ways to view retail Australian Real Estate Investment Trusts (A-REITs). The first is that retail REITs faces immense structural disruption as Amazon and other online stars crush traditional retail, forcing higher vacancies at shopping centres and lower rents.
Anchor tenants, such as department stores, have signalled store closures, meaning some shopping centres will have much floor space to re-let, possibly for less. Iconic British retailer Marks & Spencer this week announced 100-plus store closures by 2022, a slashing of floor space devoted to fashion and homewares, and higher investment in online retailing.
The second view says parts of the retail REIT sector will prosper as others struggle. Mid-tier shopping centres that rely on discretionary retail are ripe for disruption as more people buy goods online. In contrast, neighbourhood and sub-regional shopping centres that focus on basics, such as those owned by Shopping Centres Australasia Property Group, are well placed.