This article is from the Australian Property Journal archive
VICINITY Centres – which has just taken full control of Chatswood Chase shopping centre and is charging ahead with a $620 million development – says it will “remain cautious” in its retail outlook given the potential for further interest rate rises, despite recording strong numbers in the September quarter, particularly luxury sales.
The major shopping mall landlord saw portfolio sales lift 2.7% in the three-month period, largely driven by CBD retail, which was up 7.2%.
“We are seeing a strong conversion of rising visitation to retail sales growth which reflects the investment we made during the pandemic to introduce new flagship stores as well as new-to-market retailers and concepts…to our centres. Occupancy across our CBD assets nearing pre-COVID levels, and we remain confident that CBDs are steadily returning to their former vibrancy,” CEO and managing director Peter Huddle told the company’s annual general meeting yesterday.
Specialty stores and mini majors reported 1.9% growth in the first quarter. Homewares and apparel and footwear sales underperformed, albeit against a high-growth comparative period, while food catering and retail services remained resilient.
“Cafes, restaurants and in-centre services such as beauty, hair services and optical are all part of the shopping experience and remain key drawcards for shoppers. They position retail malls as one-stop-shops for goods- and-services retail as well as leisure, dining, and entertainment… none of which can be replicated online,” Huddle said.
Luxury sales have been an ongoing success story, and Vicinity saw 6.3% sales growth in the category in the September quarter.
Vicinity was pleased with the quarterly figures, but is still wary of the prospect of the Reserve Bank lifting interest rates again, perhaps as soon as this Tuesday.
“Today, the cumulative impact of the 400 basis points of interest rate hikes, is certainly impacting the consumer, however we continue to observe resilience, both in terms of sales growth as well as retailer confidence,” Huddle said.
“Needless to say, we are pleased with the relatively strong operating metrics for the first quarter, but we remain cautious in our outlook given the potential further interest rate rises and the tendency for leasing cadence and pricing to lag softening retail sales.”
Australian Bureau of Statistics (ABS) data released this week showed nominal retail sales rose 0.9% month-on-month in September, ahead of expectations of 0.3%, while the figure represented an annual uplift of 2.0%. ABS head of retail statistics, Ben Dorber, said the warmer-than-usual start to spring lifted turnover at department stores, household goods and clothing retailers, with more spending on hardware, gardening, and clothing items.
However, the numbers come up against stubborn inflation figures that have all four of the major banks tipping a rate rise – the first time since March – at Melbourne Cup Day’s board meeting.
Vicinity’s portfolio occupancy ticked up to 98.9% in the September quarter, while at the same time, the average leasing spread achieved over the quarter was 4.5%, representing the ninth consecutive quarterly improvement. The first quarter spread performance was above its guidance assumption and was influenced by deals being skewed to Chadstone and premium outlets, which collectively delivered a 14.3% spread.
Vicinity yesterday announced it had grabbed back the other half-share in Sydney’s Chatswood Chase for $307 million – some $255 million less than what it sold it for six years ago – and will press ahead with redevelopment plans as it optimises its portfolio.
The whopping 45% discount also reflects a 6.5% discount to the June book value at which Vicinity holds its existing 51% share.
Vicinity had sold the reacquired 49% stake for $562.5 million in a seismic deal with Singaporean sovereign wealth fund GIC in 2017, which also saw Vicinity pick up a half-share of the Queen Victoria Building, The Galeries and The Strand Arcade in the CBD for $556.0 million.
Vicinity also announced yesterday it had exchanged contracts with customary conditions to sell Roxburgh Village in Victoria to JY Group for $123 million, representing an 8.8% premium to book value.
