Vicinity’s Stable Occupancy and Asset Sales Cushion Against Economic Uncertainty
Vicinity Centres reports a robust third quarter for FY25, driven by strong retailer demand and shopper confidence, highlighted by the successful launch of The Market Pavilion at Chadstone.
- Chadstone’s Market Pavilion attracts record 107k visitors on first Saturday
- Stable portfolio occupancy at 99.4% with leasing spreads holding at +3.5%
- Retail sales grow 2.4% in 3Q FY25, led by specialties and mini majors
- FY25 FFO and AFFO per security expected at top end of guidance range
- Proforma gearing remains low at 27.5%, supporting growth investments
Strong Retail Momentum at Chadstone
Vicinity Centres has delivered a confident update for the third quarter of FY25, buoyed by a surge in shopper activity and retailer enthusiasm. The grand opening of The Market Pavilion at Chadstone has been a standout, drawing an impressive 107,000 visitors on the first Saturday post-launch, surpassing even peak days like Black Friday and Black Saturday in 2024. This precinct, positioned as a food destination, has not only elevated foot traffic but also enhanced the overall retail experience with innovative services such as an AI-powered Recipe Planning Tool and a Food Concierge service.
Portfolio Resilience and Leasing Strength
Vicinity’s portfolio metrics remain robust, with occupancy steady at 99.4% and leasing spreads maintaining a healthy +3.5% year to date. This stability underscores resilient retailer demand despite broader economic uncertainties. Retail sales across the portfolio grew by 2.4% in the quarter, driven primarily by specialties and mini majors. Categories such as Leisure, Jewellery, Retail Services, and Homewares outperformed, reflecting evolving consumer preferences and effective tenant mix strategies.
Strategic Asset Management and Development Progress
The company continues to execute its investment strategy with a focus on premium asset acquisitions and divestments of non-core properties. Notably, the divestments of Roselands and Carlingford Court have been successfully settled, contributing to a proforma gearing ratio of 27.5%, comfortably within the lower end of Vicinity’s target range. This financial flexibility supports ongoing growth initiatives, including the transformational development of Chatswood Chase, which remains on track to begin opening in the second quarter of FY26.
Earnings Outlook and Market Position
Reflecting the strength of its portfolio and operational execution, Vicinity now expects its FY25 Funds From Operations (FFO) and Adjusted FFO (AFFO) per security to be at the top end of its guidance ranges, 14.5 to 14.8 cents and 12.3 to 12.6 cents respectively. Despite this, the company anticipates distributions will remain at the lower end of the target payout ratio, balancing growth investment with shareholder returns. The positive momentum in retail sales and leasing, combined with disciplined capital management, positions Vicinity well amid a cautiously optimistic economic backdrop.
Bottom Line?
Vicinity’s strong Q3 momentum and disciplined strategy set the stage for sustained growth, but upcoming development milestones will be critical to watch.
Questions in the middle?
- How will the upcoming opening phases of Chatswood Chase impact Vicinity’s portfolio performance?
- Can Vicinity maintain leasing spreads and occupancy amid evolving retail market conditions?
- What are the potential risks if economic conditions deteriorate beyond current assumptions?
