S&P/ASX 200 Index (ASX: XJO) investors aren't letting yesterday's losses in US markets get them down.
Nor do Aussie investors appear overly concerned about the spectre of extended and expanded lockdowns in New South Wales to combat the spread of COVID-19 cases. With new cases also emerging in Queensland and Victoria.
The ASX 200 has shaken off earlier losses and is up 0.2% at time of writing.
ASX 200 retail shares, meanwhile, are putting in a mixed performance.
Looking at 3 of the biggest retailing landlords in Australia, the Unibail-Rodamco-Westfield (ASX: URW) share price is up 3%, the Vicinity Centres (ASX: VCX) share price is flat, and Scentre Group (ASX: SCG) is up 1.2%.
ASX 200 retail shares came roaring back from pandemic fire sale
ASX 200 retail shares – especially those reliant on brick and mortar stores – were some of the hardest hit in the early days of the pandemic-fuelled fire sale in February and March 2020.
Subsequently, they also enjoyed some of the biggest lifts as investors began to look beyond the immediate impact of store closures on sales volumes and rents.
Scentre Group is up 74% from its March 2020 lows. Vicinity Centres has gained 65% since that time. And Unibail's share price is up 69%.
Despite those impressive gains, all 3 ASX 200 shares are still trading well below their pre-pandemic levels.
And with the government's latest Intergenerational Report flagging significant cuts to earlier population growth forecasts, the big retailers may find their own growth outlooks scaled back.
COVID-19's long term growth headwinds
According to the government budget papers, Australia's population growth in 2020-2021 will be 0.1%. Growth is forecast increase to 0.2% the following year and likely to 0.8% in 2022-2023. By comparison the population grew at a blistering rate of 1.2% in 2019-2020.
That means Australia is likely to be home to 1 million fewer people by 2023 than forecasters had been predicting pre-pandemic.
The drastic slowdown, driven by a virtual halt to immigration Down Under, could throw up some significant headwinds for the growth outlooks of ASX 200 retailers.
That's according to Tony Dimasi, head of GapMaps Advisory, an independent advisor to the Aussie shopping centre industry.
"The retail sector has been very strong for two decades and the single most important thing that's driven that is population growth," Dimasi said, speaking to The Australian Financial Review.
By Dimasi's figures, population growth has fuelled demand for an additional 750,000 square metres of retail space every year since 2006.
With fewer new arrivals now expected in the coming years, Dimasi sees the potential for a significant reduction in the growth outlook for retailers:
"If [the intergenerational report forecasts] are correct and we do end up seeing roughly 1.8 million fewer people by 2040 and close to 3 million fewer by 2060 than we would have otherwise, that certainly has significant implications [for retail floor space demand].
Dimasi says that Australia roughly has 2 square metres of retail space for every resident. So, "2 million fewer people means about 4 million square metres less in retail floor space needed."
"There will be generally less floor space built than we've seen in the last two decades," he added. "Because we have low inflation and we'll have more moderate sales growth as a result of lower population growth for the next two to three years, I fully expect there will be very modest rental growth over the next two to five years."
Long-term forecasts often amended
While the growth in demand for new floor space from ASX 200 retail landlords is tied in with population growth, Dimasi points out that these forecasts are subject to change.
"The reality is that immigration levels have varied enormously and continue to do so – we should not necessarily be taking these kinds of projections at face value."
He believes "initiatives will be taken to change the situation" to support higher population growth levels.
But with the pandemic seemingly easier to control in Australia's lower population states, the public may not be overly keen to reopen the immigration floodgates any time soon.
