![Landlords like Westfield face the prospect of weak income growth over the next five years.](http://web.archive.org./web/20170810050347/http://www.afr.com/content/dam/images/g/j/6/n/j/i/image.related.afrArticleLead.620x350.gxrnnu.png/1502179290368.jpg)
Shopping centre landlords face the dual headwinds of weak income growth and declining property values over the next five years, a new report by BIS Oxford Economics warns.
"We forecast shopping centre net income growth to barely keep pace with inflation over the next five years, with probably more downside than upside risks to those forecasts" said report author Maria Lee.
She added: "We can't see much further yield firming from here. If anything, the main risk is in the opposite direction," implying that if rents remained essentially flat, values would have to fall for yields to start rising.
Ms Lee based her conclusions on a myriad of negative factors that will hurt the retail property sector over the coming years including a soft economy, weak household income growth, subdued consumer spending, the expansion of Amazon into Australia and the wider growth of online retailing.
![](http://web.archive.org./web/20170810050347/http://www.afr.com/content/dam/images/g/x/s/0/j/i/image.imgtype.afrArticleInline.620x0.png/1502179044518.png)
"Some centres are at risk of losing anchor tenants and/or specialty retailers and will underperform. Even for stronger centres," she said.
"Even experienced shopping centre managers may have trouble in dealing with what are arguably the toughest conditions yet in retail property investment."
Online spending threat
Ms Lee placed particular emphasis on the impact rising online spending could have on bricks and mortar retailers' ability to grow their revenues in the coming years. She said that even at a modest growth rate of 10 per cent per annum, online retailers would have a 12 per cent market share by 2027 and the rate of retail turnover growth in physical stores would reduce by 0.4 to 0.5 percentage points per annum.
The BIS Oxford Economics report follows forecasts from Citi that listed mall owners will only achieve earnings growth of 3.5 per cent this reporting season, below market consensus of 5 per cent, due to challenging leasing conditions and rising electricity prices.
At the same time mall owners face an increasingly hostile tenant base as seen by franchisor SumoSalad's drastic use of insolvency laws to force Westfield owner Scentre Group to cut its rents.
Another major retail group, the Franchised Food Company with more than 200 outlets, warned recently that landlords needed to be realistic in the rents they charged or retailers would quit their malls in droves.