A crisis in bricks-and-mortar retail is less likely to occur in Australia, as shopping centres typically house supermarkets, which provide exposure to non-discretionary retail spending. Supermarkets also sign long leases with fixed rent increases.

At the Investment Magazine Infrastructure and Real Estate Conference, held in Melbourne on Wednesday, superannuation funds also heard profitability was underpinned by solid economic and population growth in Australia.

These were the views of Mercer consultant Simon James, who qualified his comments by conceding the structural and cyclical factors facing retail would affect all retailers to some degree and he doesn’t see Australia as immune.

James told the audience that client discussions revealed retail was a highly polarising issue; some were convinced the sector was resilient and others were anticipating the retail apocalypse.

Unlike the UK retail sector, which is struggling with oversupply, Australian malls are less exposed to fashion retailers and speciality shops, which also provides some insulation from revenue erosion, he said.

Further, James argued, Australia’s shopping centres are high-value assets and some of the most productive in the world. As a consequence, they attract retailers.

“It is also worthwhile noting that the big Australian superannuation funds are invested in the top quartile of shopping centre assets, which isn’t necessarily the case in other jurisdictions,” he said. “Additionally the managers of these assets are retail specialists, which also isn’t necessarily the case elsewhere.”

Australia also benefits from a stringent planning system; there is no proliferation in the retail space as seen in other countries, he told conference goers.

In the UK, for example, asset owners have seen a collapse in mall asset values as internet retailing has become been a major force, according to Richard Tanner, head of AEW UK. Internet penetration is at 80 per cent, which has clearly had an extreme impact on income streams, he reminded the audience.

“In terms of investors, we see retail sliding but it’s been eclipsed by what’s happening in the industry sector and, specifically, fund exposure to warehousing,” Tanner said. “In the UK, you have a situation where you can make two sorts of plays. You can hold retail where, if internet penetration continues to rise, it’s financial Armageddon for investors. Or, you can have an each-way bet by investing in assets that have other profitable uses for the land.”

No one was talking about the death of town centres or saying physical malls would cease to exist, he went on to say. But during his presentation, he underlined the importance of the transition period for asset owners and added that repurposing the asset could be a painful ride.

Tanner told the audience the UK had already gone through the various stages of denial about malls and now asset owners were being put to the sword by the changing economics.

He agreed that the very top half per cent of shopping centres could be classed as defensive stocks but said that if retail continued to weaken, UK asset owners still had multiple commercially viable options for the space.

Elizabeth Fry has been a financial journalist for more than 25 years and has written for a number of publications, including CFO, The Financial Times and The Australian Financial Review.