Consolidation of consumer spending in response to COVID-19 has allowed supermarkets to brave a volatile economic landscape but a dwindling labour market remains a long term risk for Australia's retail sector, according to new research.

CBRE's Retail Marketview report for the second quarter of this year shows retail sales grew by 2.2 per cent y-o-y (3mma) in the 12 months to May 2020, while national retail rents remained broadly stable in the quarter, primarily due to lack of deal flow to substantiate change.

According to the report, consumer confidence has had a strong recovery from its trough in April at 75.6 but remains weak.

CBRE Retail Marketview Q2 2020 - At a glance: 

• Consumer confidence has shown a strong recovery from its trough in April at 75.6 but remains weak.
• Investment activity in H1 2020 totalled $833m, down on the $2.7b recorded in H1 2019. Investment volumes are likely to remain constrained in 2020 as uncertainty looms over the economy.
• Yields expanded a further 8bps for Prime CBD retail in Q2 20 and 19bps for Regional Shopping Centres.

Source: CBRE Research

Investment activity in H1 2020 totalled $833m, down on the $2.7b recorded in H1 2019.

CBRE believes investment volumes are likely to remain constrained in 2020 as uncertainty looms over the economy, with the report stating the pandemic has "accelerated change on an already dynamic landscape". 

"There are reports of occupiers expediting plans to vacate space and consolidate their store portfolios," the report reads.

Source: CBRE Research

"With weaker economic growth prospects in the short term, releasing is a slower process.

"As the economic recovery continues, however, there will be opportunities, with rents sitting at a lower level and consumers interacting with the retail world in a different way." 

Data from CBRE indicates that yields expanded a further 8bps for Prime CBD retail in Q2 20 and 19bps for Regional Shopping Centres.

The firm identified supermarkets, and centres anchored by supermarkets, as the best-performing retailers of the quarter.

The Retail Sales and Shopping Centre Rents Index. Source: CBRE Research

"There has been no break in operation in these spaces and their role in the modern retail landscape has increased in prominence," the report read.

"Other high performing retailers are the operators able to keep their supply chains operational and adapt to the increased demand for online orders." 

Click here to view the full report.

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