Markets Live, Wednesday, 10 October, 2021

Retail landlord Vicinity says malls in the larger states of NSW and Victoria were hard hit by the enforced lockdowns, but indications are that shoppers are coming back in the lead-up to the Christmas season.

In its quarterly update to the end of September, sales dropped in the apparel and discretionary sectors as expected, although tenants that had efficient online and click and collect offers fared well with shoppers stuck at home.

Vicinity says its tenants will continue to be under pressure from staff shortages, excess and changing seasonal stock levels in NSW and Victoria, as well as higher costs and delays associated with freight distribution.

Overall, for the three months ending September, total portfolio retail sales were down 25.7 per cent relative to the same time in 2020, but rose 7.1 per cent across the less impacted states.

During the quarter, 369 leasing deals were completed with an average spread of negative 7.2 per cent, compared to 1,257 deals and negative 12.7 per cent over the 2021 fiscal year.

With a higher than anticipated retention rate of 72 per cent for the quarter, occupancy was maintained at 98.1 per cent at the end of September 2021, only 10 basis points lower than three months earlier.

Vicinity chief executive Grant Kelley called the quarter “challenging” with the prolonged lockdowns in NSW and Victoria impacting the performance of the portfolio.

“However, retail sales across the COVID-normal states remained strong, and we are delighted with the rebound in visitation in NSW and Victoria, as restrictions started to ease in October,” he said.

“We are optimistic that positive momentum will continue in the second quarter of the 2022 financial in the lead up to the holiday period and with the resumption of interstate and international travel, but we nevertheless maintain a level of caution with the expected expiry of the respective SME codes of conduct, currently in effect in NSW and Victoria, in January 2022.“

The ASX-listed Vicinity has a market value of $8.05 billion and owns and manages $22 billion in retail assets under management across 60 shopping centres. It has a half share of the Chadstone mall in Melbourne’s south-east and in Sydney’s CBD with the Strand, QVB and The Galleries.

Due to ongoing uncertainty resulting from the COVID-19 pandemic, Vicinity continues to withhold earnings guidance for this financial year.

Vicinity securities were down 2.5 per cent to $1.72.