Rising Costs and Development Risks Shadow Vicinity Centres’ Strong FY25 Results
Vicinity Centres reported a robust FY25 with statutory net profit soaring to $1 billion, driven by strategic portfolio repositioning and strong leasing momentum. The company’s focus on premium retail assets and key developments underpin a cautiously optimistic outlook for FY26.
- Statutory net profit doubles to $1,004.6 million in FY25
- Comparable net property income grows 3.7%, led by premium assets
- Completion of Chadstone’s Market Pavilion and One Middle Road office tower
- Acquisition of 50% stake in Lakeside Joondalup for $420 million
- Leasing spreads improve to +2.5%, occupancy rises to 99.5%
Strong Financial Performance Amid Strategic Repositioning
Vicinity Centres has delivered a standout FY25 result, with statutory net profit after tax more than doubling to $1.004 billion, up from $547.1 million the previous year. This surge was underpinned by a 3.7% increase in comparable net property income (NPI), reflecting the company’s successful focus on premium retail assets and disciplined portfolio management.
The funds from operations (FFO) rose modestly by 1.4%, or 3.6% when adjusted for one-off items and development-related rent losses. The company declared a full-year distribution of 12 cents per security, slightly up from 11.75 cents in FY24, maintaining a payout ratio of 95.4% of adjusted FFO.
Portfolio Enhancements and Development Milestones
Key to Vicinity’s growth story was the completion and opening of Chadstone’s Market Pavilion and the One Middle Road office tower, which have injected fresh vitality into Australia’s largest shopping centre. The company also acquired a 50% interest in Lakeside Joondalup, Western Australia, for $420 million, further strengthening its premium asset base.
Leasing activity remained robust, with occupancy climbing to 99.5% and leasing spreads improving to +2.5%. Notably, the apparel and footwear category achieved a 4.1% leasing spread, driven by strong demand at Chadstone and outlet centres. The specialty occupancy cost ratio of 14.1% suggests room for continued rent growth, supported by retailer demand for larger store formats and longer leases.
Development Pipeline and Future Growth Prospects
Looking ahead, Vicinity is advancing the redevelopment of Chatswood Chase into Northern Sydney’s premier fashion destination, with pre-leasing largely complete and staged openings planned through FY26. The Galleria redevelopment in Western Australia has also been approved, targeting a Christmas 2026 opening for its new entertainment and lifestyle precinct.
The company’s FY26 guidance anticipates FFO growth of 2.0% to 3.5%, supported by a comparable NPI growth forecast of around 3%, excluding new taxes and levies. Development-related rent losses are expected to moderate, and capital expenditure is set to increase to $400-$450 million as Vicinity continues to invest in premium retail assets and mixed-use projects.
Disciplined Capital Management Maintains Financial Strength
Vicinity’s balance sheet remains strong, with gearing at a conservative 26.6% and ample liquidity to cover all FY26 debt maturities and committed development spend. The company divested $457 million of non-strategic assets during FY25, recycling capital into higher-quality investments. It also issued $500 million in medium-term notes and secured $1 billion in new and extended bank facilities, ensuring funding flexibility.
Valuation gains of $349 million for the full year, driven by stable capitalisation rates and income growth, contributed to a 4.4% increase in net tangible assets per security to $2.40. This reflects investor confidence in Vicinity’s premium asset strategy amid a tightening retail supply environment.
Bottom Line?
Vicinity Centres’ FY25 results affirm its premium asset strategy and development pipeline, setting the stage for sustained income growth despite evolving retail market challenges.
Questions in the middle?
- How will new state-based taxes and levies impact Vicinity’s operating expenses and income growth in FY26?
- What is the potential upside from mixed-use developments beyond retail, particularly at Bankstown and Chatswood?
- How resilient will leasing spreads and occupancy remain if retail market conditions soften or interest rates rise?
