Company reporting season is now well underway and one thing we're learning is that owning a shopping mall is getting a lot tougher.

Key points: Two of Australia's major listed shopping centre operators are worth less than they were two years ago on the share market

Two of Australia's major listed shopping centre operators are worth less than they were two years ago on the share market Some shopping centre owners are still demanding 4 per cent annual rent rises, but this has seen vacancy rates rise

Some shopping centre owners are still demanding 4 per cent annual rent rises, but this has seen vacancy rates rise The mix of shops in centres is shifting from retail (which tend to pay higher rents) to services (which generally pay less)

For example, GPT, which has centres such as Rouse Hill Market Town in north-west Sydney and Melbourne Central in the heart of Melbourne, saw income from its retail division flatline last year.

It blamed this on fixed rent increases for existing tenants not making up for empty stores staying vacant for longer between tenancies.

As well, with sales growth almost non-existent, the proportion of rent tied to sales fell.

Retail veteran Jacqueline Major, who owns swimwear store Oz Resort, has seen the good, the bad and the ugly of landlords in her 30 years in business.

But she said Westfield Bondi Junction, in Sydney's eastern suburbs, nearly put her out of business.

"Westfield was a 220-square metre store," Ms Major told the ABC.

"It was $1,000-a-day rent, and we had five staff to run it each day, so it was a very expensive store."

When she struggled to find that thousand dollars a day, Jacqueline Major said Westfield's reaction was swift.

"They rip out your shop fit," she lamented.

"It doesn't matter how much it cost you, they put it in the dumpster basically."

Ms Major left Westfield Bondi Junction in 2006.

No retail revival on the horizon

But what goes around comes around, and now it's the landlords who have a problem.

"You've had a Coalition victory and three rate cuts, which have seen house prices improve, but we haven't seen that wealth effect translate into strong retail sales and we don't think you will for a while yet," explained Sholto Maconochie, who analyses shopping centres for US investment bank Jefferies.

Even the biggest players are feeling the pinch.

Scentre Group, the operator of Westfield, is Australia's premier retail landlord and saw operating income grow by just 2 per cent last year.

"It's not shooting the lights out," admitted Scentre Group CEO Peter Allen.

"But you've also got to recognise you're in a low-inflation environment."

Scentre Group's earnings have been sustained by the traditional practice of landlords — automatic rent increases.

This year it was 4 per cent, well above sales growth.

Scentre Group CEO Peter Allen says, "you've also got to recognise you're in a low-inflation environment". ( ABC News: Grant Wignall )

"Provided that we have that demand for customers coming to our centres, we believe we will be able to have that growth in those contractual obligations," Mr Allen said.

"It's important for us, and I think it's sustainable as far as the business is concerned."

Shopping centres lose market value

But a number of things are putting the brakes on income growth.

The demise of so many fashion chains in recent times — the most recent of which is Jeanswest — has many centres renting to a different type of tenant.

Sholto Maconochie is an analyst at Jeffries, covering shopping centres. ( ABC News: John Gunn )

"More food and beverage, more services — so doctors, medical, government services, banks — where people want to be in the mall, not leave the mall," Sholto Maconochie observed.

But there's a catch.

"These types of tenants typically don't pay the same rent as a fashion or apparel retailer," he added.

In these straitened economic times, landlords are being forced to offer discounts to persuade existing tenants to renew their leases, or to get new tenants to sign up.

"We think those [discounts] will persist for some time, until retail sales improve and retailers can pay more rent," Mr Maconochie added.

And that's reflected in the market's view of retail landlords.

Scentre Group is trading lower today than it was two years ago.

Another pure-play retail landlord, Vicinity, has also seen its share price fall in that time.

The stock market represents investors' views of companies' future earnings and Scentre Group's Peter Allen admits the current environment is putting a brake on earnings growth.

"As we curate the right mix, we're not necessarily going to get the same level of rent as what we've had from a previous retailer, and I don't necessarily expect that," he conceded.

You don't pay rent in cyberspace

Even in well-to-do areas, such as Mosman on Sydney's lower north shore, shops and their landlords are doing it tough.

Mosman is one of Australia's wealthiest suburbs, but when the ABC visited last week, we counted 14 shops for lease.

Jefferies' Sholto Maconochie says the problem is simple — rents are too high.

"It shows that the demand for tenants is weak, but the rent expectations of landlords are way above what tenants are prepared to pay. They need to meet somewhere in the middle."

For Jacqueline Major at Oz Resort, paying $1,000-a-day in rent is long gone.

She's about to move out of her warehouse back into a store — at a tenth of the rent she was paying at Westfield Bondi Junction.

"We've found a landlord that wanted to listen to us and give us a rent that we could achieve and we can retail quite happily knowing we can pay the rent at the end of the day," Ms Major explained.

But, in another ominous sign for landlords, Oz Resort now does the bulk of its business online.

And you don't pay rent in cyberspace.