“How soon will anybody get on an aeroplane? How soon will anybody stay in a hotel? How soon will anybody go to a mall? The fact that these places may be open doesn’t necessarily mean that they’ll be doing business.”

It’s a great point, and one worth considering in the context of two quarterly updates from Australian property groups: logistics and warehouse Goodman Group and Vicinity Centres, which owns one of the country’s biggest portfolio’s of shopping malls, including a large chunk of the nation’s biggest at Chadstone in Melbourne.

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Vicinity’s numbers for the March quarter actually held up reasonably well, with comparable growth in moving annual turnover (MAT) of 1.6 per cent year-on-year.

But the numbers for the month of March tell the real story. MAT fell 16.5 per cent across the portfolio, despite supermarket turnover rising 22.2 per cent.

Department store turnover plunged almost 40 per cent, while turnover at specialist stores and mini-majors (think bigger retail chains) was down 31.1 per cent. Not surprisingly, clothing sales plunged almost 44 per cent, while food sales fell 42 per cent.

As at May 4, 50 per cent of stores in Vicinity malls were open. And that was after a relatively positive week, when 530 stores came out of hibernation in the previous seven days. Chief executive Grant Kelley is cutting staff salaries to try and bring costs down.

Goodman Group’s update tells a very different story. Where Vicinity withdrew guidance in the middle of March, Goodman confirmed its forecast on Thursday for 11 per cent growth in operating earnings for the 2020 financial year.

Its cashflow is being supported by strong demand for warehouse space from customers in the food, consumer goods and logistics sectors, as retailers scramble to either keep up with demand for essential products or increase the distribution capacity of their online sales channels.

Some of this demand is permanent, but some is temporary – we know, for example, Coles and Woolworths have had to build “pop up” distribution facilities in the last two months to keep up with the tidal wave of demand they’ve been hit with.

Goodman’s occupancy in the properties it owns remains at 97.5 per cent, despite what the company described as some pain among its SME tenants. Its annual rental income from this portfolio sits at $344.5 million.

The two companies neatly tell the story of the economy over the last few months. But they also give us a glimpse of what’s to come.

For example, both groups are working with SME tenants that are in real distress as a result of the pandemic shutdowns, in line with the federal government’s directive to landlords.

But there is surely a question about how long any support for tenants may need to continue.

In Vicinity’s case, Zell’s point about retailers being open but not doing any business is a red flashing light. How quickly foot traffic returns to Australia’s malls, and whether consumer attitudes to tackling the crowds at big shopping centres may have been changed by COVID-19, are difficult questions to answer.

For Vicinity’s SME tenants – and even its large ones – surviving a period of no revenue when you have no rent to pay is one thing. But surviving a period of low revenue when your landlord needs to start charging rent again is another entirely.

On the other hand, while Goodman’s business will be disrupted in the coming months, it’s hard to see the underlying trends it has bet on – the shift to online, retailers looking to go direct to consumers, warehouse space as close to the customer base as possible – being disrupted by COVID-19. If anything, those trends could be accelerated.

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For what it’s worth, the Grave Dancer is worried about what happens to retail property in a world where COVID-19 has changed consumer psyche in ways large and small. “I haven’t shaken hands with anyone in eight weeks. I don’t have any frame of reference for that,” Zell says.

He says the old argument that retail property was safe because it was located in the best corners of cities and suburbs might not hold any longer.

“The best corners are defined as where the best traffic is. But if the overall level of traffic diminishes, then the definition of ‘best corners’ doesn’t sound quite the same way.”

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