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Image – Wikimedia Commons.
  • Discount department saw sales rise11.7%, normal department stores fall 22.4%
  • DFO stores helped portfolio occupancy, up 2.9%
  • Average cash collection for Q3 was 82% of gross billings

Mid-January this year, Vicinity Centres (ASX: VCX) reported a valuation decline of $570 million. In half yearly results, the company posted an almost $400 million loss, offset somewhat by suburban and regional centres which fared better than the CBD.

The expected impact of Covid meant retail portfolios were generally some of the worst hit, other industries including the arts, tourism, and hospitality.

Scentre Group (ASX: SCG) likewise saw a statutory loss of some $3.73 billion in February, valuations suffered more so, down $4.25 billion.

Q3 gradual recovery

CEO and Managing Director of Vicinity Centres, Grant Kelly, said the company is starting to see improvements across the board.

“Whilst overall retailer confidence remains fragile, retailers are increasingly committing to new leases versus previous quarters which is encouraging. However, as the recent quarter has demonstrated, risks of further disruptions from snap lockdowns remain, while tourism and the timing of office workers returning to CBD offices is uncertain.”

Grant Kelly, CEO and MD of Vicinity Centres

Vicinity said portfolio retail sales still declined in Q3, down 7%, but said relative to the previous corresponding period it “[reflected] a subdued but improving retail sales environment.”

Unsurprisingly, the company saw supermarkets perform well, up 1.5% from the previous Q3. Vicinity said “hyper-localised shopping” helped buoy the supermarkets, local shopping a trend that has helped the suburban and regional portfolios offset some losses from the CBD centres, as well as helping buoy the bottom line of large format retail.

As Australian’s spent more time shopping than anything else, and with increased spending power, the expectation would be for many to splash out on luxuries. That was not necessarily the case, Vicinity saw increased sales in discount department stores, up 11.7%, but normal department stores saw a drop of 22.4%; interestingly, occupancies for premium, CBD, and DFO assets were up.

Visitations averaged 77% for the quarter, but when excluding CBD centres, visitation of shopping centres averaged 83%.

Whilst it is not a snap back to pre-pandemic shopping in the CBD, Vicinity is quietly confident as a CBD revival is on the horizon and a travel bubble with New Zealand “gains traction”.

Occupancy and collections

Vicinity reported an occupancy rate of 98% which the company said, “remained in line with three months earlier.”

Notably, the company said “… easing spreads for the Premium & CBD and DFO assets were -7.2% and +2.9%, respectively, indicating the important role these centres play in retailers’ sales channel mix despite the subdued sales environment.”

The company expects to round out the year on a more positive note than last, Mr Kelly said, “… today’s announcement shows that signs of recovery are emerging. Federal and State governments continue to contain the virus successfully, and Australians are returning to their favourite retail destinations with capacity to spend.”

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