GPT confident retail property portfolio will continue to deliver strong returns and rental growth

Shopping centre landlord GPT is backing its portfolio of regional shopping centres to continue to perform strongly, despite the threat posed to vacancies and rental revenue from online retailing, according to a report by credit rating agency Moody’s

The Moody’s report warned that online shopping and the high Australian dollar could impact on vacancy rates and inflation-adjusted rental increases for retail REITS including GPT and Westfield.

Responding to the Moody’s report, Mark Fookes, GPT’s head of investment management, says the company “believes in the future of retail as a strong investment class”.

“We are confident our retail portfolio will continue to deliver solid income growth as GPT continues to actively evolve the tenant mix, invest in complimentary technology, and focus on enhancing the customer experience,” he says.

“GPT believes quality regional shopping centres which dominate their trade area will continue to outperform other retail asset classes.

“Quality regional centres provide the benefits of strong tenant demand; tenant diversification; a broader retail offer including entertainment and leisure; and flexibility to evolve the retail offer and enhance the customer experience.

GPT has a 60% of its property investments in the retail space, including the Highpoint shopping centre in Melbourne’s west, the 10^th biggest mall in Australia and currently being expanding.

Fookes also highlighted that 95% of GPT’s retail portfolio is made up of regional shopping centres, one of the highest proportions of its peers.

Moody’s expects regional centres to show greater resilience than sub-regional and neighbourhood centres, particularly those that “provide a broad range of offerings, including entertainment, restaurants and services, are more likely to be able to continue to attract tenants than smaller and more narrowly defined centres”.

“In addition [to our high exposure to regional shopping centres], 86% of our retail portfolio income is underpinned by structured rental increases of 4.5% in 2012,” Fookes says.

Westfield declined to comment on the Moody's report, deferring to its interim results, which will be released on August 16.

GPT will release its full results on August 27.