The disconnect in trading conditions between discretionary and non-discretionary retail spending was confirmed by the ABS’s retail trade data which highlighted annual food turnover has continued to grow strongly at 4.2 per cent, while department stores and clothing store turnover posted an aggregate fall of -2.6 per cent.

Analysis by the Charter Hall Group indicates that since calendar year 2000, growth in supermarket trade has almost doubled increasing by 99 per cent, whereas clothing and department store turnover has risen just over half this figure at a combined 53 per cent.

Research manager for Charter Hall, Chris Freeman, said while the 2011 results for discretionary retailers show the very difficult conditions faced in the current market, the stability of the food sector and supermarket-based retail has led to significant outperformance in this sector over the longer term.

“While calendar year 2011 has clearly been particularly challenging for the discretionary retailers, food based turnover was a notable outperformer even prior to this period with the average annual growth over the past 10 years for supermarkets equating to 5.8 per cent against 3.5 per cent for department stores and clothing combined,” he said.

“This has flowed through into the performance of supermarket-anchored centres with Charter Hall Retail REIT’s latest released portfolio figures showing occupancy of 98.9 per cent with rental growth of 4.4 per cent achieved on 82 leasing transactions undertaken in the quarter to September 2011.”

Freeman said given this strong performance and notable yield gap over regional centres, the group expects to see increased demand from investors of all classes in the supermarket-anchored retail sector over coming years.

Charter Hall was a major buyer of supermarket anchored retail in 2011, acquiring 12 centres for both its listed managed REIT and wholesale clients worth a total of $423 million, with yields ranging from 8.0 per cent to 9.0 per cent.

According to Charter Hall Retail REIT’s acting CEO Scott Dundas, investors are starting to realise that the word ‘retail’ for property as an asset class is simply too broad, with the drivers behind supermarket-anchored centres still clearly evident.

“In an investment environment where defensive assets are highly sought it is not surprising that interest is turning toward supermarket-anchored retail,” he said.

“The lower occupancy costs for specialty tenants in food based centres have also been a major attraction for investors with Charter Hall Retail REIT’s specialty occupancy cost representing 8.3 per cent of tenants’ turnover as at September 2011, whereas in regional centres it is typically at least double this figure.”