Over the past decade, retail rental growth has been less than sales growth for many ASX-listed retailers. Can this trend continue? In Issue 8 of Price Watch, we analyse floor space supply and demand. We expect retail supply per capita to fall by 0.7% p.a and retail demand to rise by 0.5% p.a. This is a meaningful disconnect placing upward pressure on rents. We expect half the gap to be solved through productivity initiatives by retailers and landlords to work floor space harder and reduce anchor tenant space. The retailers with the highest exposure to the top 30 shopping centres are Accent Group, Premier Retail, City Chic and JB Hi-Fi.

Many Australian consumer companies are likely to report weak 1H24e results. However, they are likely to be better than consensus estimates with slightly better sales trends and higher gross margins in some cases. While earnings should be fine this half, share prices have run in anticipation of results and the trading updates and outlook commentary are likely to flag higher operating cost growth as a headwind.