This article is from the Australian Property Journal archive
DESPITE a difficult shopping environment, retailer demand for stores in premium shopping malls helped Vicinity Centres to bank positive leasing spreads and a year-on-year increase in sales in the March quarter.
Vicinity’s quarterly report was released a day after Australian Bureau of Statistics data showed growth in retail sales hit its lowest level since the depths of COVID, as shoppers continued to face cost-of-living challenges.
Retail sales grew by 0.8% in the year to March, but in monthly terms fell 0.4% compared to February.
Vicinity recorded a 1.6% year-on-year increase in portfolio retail sales in the March quarter.
“Our operating metrics remain strong and continue to be underpinned by retailer demand for physical stores, particularly in our premium centres, and strong retail sales growth since the end of the pandemic,” said CEO and managing director, Peter Huddle.
“Consequently, we are confident that comparable net property income growth for FY24 will remain in line with 1H FY24, at circa 4%.
“Furthermore, we retain our view that the medium to long term fundamentals of the Australian retail sector remain favourable, supported by record levels of migration, a robust employment market, and stage three tax cuts becoming effective from 1 July 2024.”
Vicinity recorded positive year-to-date leasing spreads of 2.6%, and a March quarter leasing spread of 0.5%.
Occupancy was at 99.1%, in line with the first half of the current financial year.
In March, Vicinity assumed full control of Chatswood Chase following a $307 million deal, and in and commenced the $620 million major retail redevelopment. While gross lettable area will remain broadly unchanged, Vicinity said it is “elevating the tenant mix significantly”.
“The redeveloped asset will house the largest luxury retail precinct in NSW outside of the Sydney CBD. The development now has approximately 70% of income secured, and with the current level of retailer demand, we are optimistic that the centre will be 100% pre-leased by Christmas 2024,” Huddle said,
Vicinity reaffirmed its earnings guidance of FY24 funds from operations and adjusted funds from operations per security expected to be around the top end of the 14.1c to 14.5c and 11.8c to 12.2c ranges, respectively.
