The Vicinity Centres (ASX: VCX) share price is in focus this morning on the back of its latest quarterly update.
The property group was quick to point out early signs of improvements. But investors will still struggle to fully understand what COVID-normal means for the retail and office sector.
At least Vicinity's shopping centres are showing signs of growth again in the March quarter.
Signs of life post COVID
Management said that portfolio retail sales in the month of March was only down 2.3% compared to the same month last year.
It also reported that average centre utilisation in the quarter was 77% of the previous corresponding period.
If you ignored CBD properties as these are harder hit by the pandemic, utilisation was 83% of 3QFY19.
Vicinity share price finds solace in improving retail spend
"Importantly, while centre visitation is growing, the rate of retail sales improvement is greater, highlighting that consumers are spending more per visit (average spend increased 23% in March 2021)," said Vicinity.
"Strong spend per visit in conjunction with increasing centre visitation may be a positive lead indicator for continued recovery."
Retail rents remain under pressure
The supermarkets located in the centres, like Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) are doing well. But the smaller specialty retailers are still struggling.
This probably explains the -13.5% leasing spread recorded in the March quarter compared to the -12.6% average for 1HFY21.
Leasing spread between the new rent and the previous rent for the same retail space.
New normal hard to define
While it's really no surprise that things are improving given how our economy is rebounding, experts are still debating what the new normal is for shopping centre properties post COVID-19.
The lockdowns have eroded the near monopolistic powers for the major shopping centre owners like the Vicinity share price and Scentre Group (ASX: SCG) share price.
The latest update from Vicinity won't add much clarity on this front.
Foolish takeaway
Further, the same questions are clouding over the office property space as companies adjust to accommodate more remote workers.
Governments and major corporations are starting to encourage or mandate their employees return to the office. But office occupancy may not return to pre-COVID levels, at least not for a long time.
This again is a threat to ASX property shares that own A-grade properties, which always commands a rental premium.
Their bottom lines may stay under pressure for longer than most other ASX sectors.
