Retail landlord confident despite “pockets of weakness”

chadstoneRetail landlord, Vicinity Centres, has re-affirmed its guidance at 18.6 to 18.8 cents per security, despite “pockets of weakness” in the retail sector.

Total portfolio moving annual turnover (MAT) growth for the 12 months to March was 0.4 per cent, compared to 1.3 per cent to December 2016. All store types reported slower growth with “particular softness” in both the department store and discount department store categories. Excluding the impact of some of the more significant retailer administrations, Dick Smith, Payless Shoes and Pumpkin Patch, total portfolio MAT growth was 1.2 per cent.

Demand for beauty and wellness services and products remained solid with the general retail (+3.7per cent) and retail services (+7.2 per cent) categories experiencing strong MAT growth, including cosmetics (+9.2 per cent), hairdressing/beauty (+8.3 per cent) and optometrists (+6.0 per cent).

Apparel growth was lower at 1.2 per cent with men’s apparel (+7.0 per cent), fashion accessories (+3.8 per cent) and footwear (+3.3 per cent) continuing to show solid growth, while women’s apparel (-2.1 per cent) remains soft.

“While there are pockets of weakness in the retail trading environment, we believe that retail expenditure fundamentals remain sound,” said McNaughton. “Unemployment remains relatively low as are interest rates, house prices are generally still growing, and the Victorian and New South Wales economies are performing well. The Western Australian economy remains soft.”

Comparable specialty store moving annual turnover (MAT) growth up 1.1 per cent for the 12 months to March.

“Australian retail sales growth has been impacted by a moderating retail trading environment,” said McNaughton. “Lower retail prices, particularly in apparel, together with some high profile retailer administrations, and a number of anomalies including Easter and school holidays for Victoria and Queensland all occurring in April this year compared to March last year, also impacted retail sales growth in the period.”

During the quarter, Vicinity saw a flurry of retail activity, including commencing construction at The Glen, which saw total development costs reduced by $30 million to $460 million following the appointment of a residential developer and the sale of air rights.

Vicinity also opened The first Legoland Discovery Centre in the Southern Hemisphere at Chadstone shopping centre in Melbourne, which Vicinity said has operated at capacity patronage since opening.

“We increased our DFO outlet centre ownership, strengthened our capital position and achieved a number of important milestones in our development pipeline,” said McNaughton.

In April, Vicinity settled the acquisition of the remaining 25 per cent interest in DFO South Wharf in Victoria for $141.25 million and recently completed 1,100 space multi-deck car park at the centre.

“In January, Standard & Poor’s raised Vicinity’s credit rating to ‘A/stable’ in recognition of improved portfolio quality and balance sheet strength.,” said McNaughton.

The $666 million (Vicinity’s share: $333 million) development at Chadstone has seen annual visitations to the end of March up 14 per cent. Construction of the project has completed, with the majority of backfill tenancies to be opened by June 2017.

Vicinity said the $350 million (Vicinity’s share: $175 million) redevelopment at Mandurah Forum remains on track with the first retail stage set to open in the September 2017 quarter. On completion in mid-2018, the centre will be completely transformed and expanded to 64,500 sqm, consolidating it as the dominant retail destination in the trade area. The centre will introduce a new format David Jones store, along with a new Target store and refurbished Kmart and Coles stores.

Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.

Comments

2 comments

  1. Nick posted on May 3, 2017

    Retail rents a still to high that's why yesterday victoria station and Kate Hill have called in the administrators reply

  2. Peter Buckingham posted on June 6, 2018

    Very interesting that we now have concurrence / admission from the landlords that the MAT's are growing at around 0.4% for 12 months, and yet what are the pre set rental increases they charge tenants? "Total portfolio moving annual turnover (MAT) growth for the 12 months to March was 0.4 per cent". Maybe the Senate Inquiry into Franchising needs to spread its wings to cover shopping centre rents,? This is even worse than we laid out in our white paper - Shopping Centres - an Inconvenient Truth. reply

Comment Manually

I have read and agree to the Terms and Conditions and Privacy Policy.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Loading...

Inside Retail Polls

Retail Outlook 2019
How are trading conditions for you in 2019?

Twitter

Supermarket giant Coles has expanded its Uber Eats trial to four more stores in Sydney, and widened the range of go… https://t.co/ud3eyY7qDm

8 hours ago

Coffee chain sets up fund to invest in food and retail startups. https://t.co/N1lZhVWtLB

10 hours ago

Premier Investments seeks to broaden the brand's customer base, expanding into 5 new Asian markets, 4 European mark… https://t.co/YnMEgwL1qc

12 hours ago
x

SUBSCRIBE
FREE NEWS BRIEFS Get breaking news delivered