Australian real estate firm Vicinity Centres will expand its luxury offering in the northern Sydney suburb of Chatswood following a lift in national luxury sales in the second half of FY23.
Vicinity confirmed it received approval for its redevelopment plans of the upper levels of Chatswood Chase shopping centre. It will mark the second phase of an initial redevelopment of the centre’s fresh food and dining precinct on the lower ground - currently underway.
Vicinity Centres chairman Trevor Gerber and CEO & MD Peter Huddle said Chatswood Chase is “strategically located in one of Australia’s most affluent catchments which bodes particularly well for an elevated retail offering.”
“Our luxury stores have grown from 12 sites at Chadstone in 2009, to 66 stores across the portfolio today,” the pair wrote in a joint letter to shareholders. “We value our strong partnerships with luxury brand owners, and we continue to work together to expand existing and new luxury precincts in a number of our premium assets.
“Luxury retail sales now represent more than $1.0 billion in sales per annum relative to less than $100 million in 2009.”
Investment capital expenditure in FY24 is expected to be approximately $400 million, which also includes a 20,000 sqm office tower at Chadstone.
According to Vicinity, its luxury sector continued to perform strongly in the second half of FY23 with growth of 7.3%, while Vicinity’s premium centres, comprising Chadstone, Outlets and CBDs also delivered strong growth, up 7.2%, 8.8% and 21.0% respectively.
Total retail sales in the second half were up 8.0% on the second half of FY22, with specialty stores seeing a growth of 10%.
Discount department stores lifted sales by 7.8% while general department stores rose by 5.5% in the second half.
Vicinity reported that all product categories delivered growth in 2H FY23 with apparel & footwear and jewellery up 7.8% and 14.6% respectively.
Vicinity Centres noted that while the retail sector remained resilient in FY23, the rate of sales growth moderated late in the fourth quarter of FY23. After strong growth in recent periods, the company reported homewares as well as apparel & footwear had flat sales during the quarter as higher living costs impacted consumption.
Across the CBD portfolio, retail sales growth hit 21% for the 2H FY23, up 37.2% in the March quarter, but down to 9.5% in the fourth quarter. According to Vicinity, this was underpinned by a 30% uplift in visitation, with the steady return of office workers to CBDs and the continued recovery of international tourism, now reportedly at 77% of pre-COVID.
The company claimed that while the number of international tourists is forecast to reach pre-COVID levels in 2025, tourism spend is expected to return to pre-COVID levels in 2024. Vicinity noted this bodes well for Vicinity’s CBD portfolio.
Total portfolio visitation increased 11.9% in 2H FY23 relative to 2H FY22 with all centre types recording an improvement.
Vicinity’s CEO and Managing Director, Mr Peter Huddle said:
“FY23 has been a year of resilience and growth at Vicinity,” CEO and MD Peter Huddle said. “During the year, we deliberately executed at pace while the retail sector was favourable.
“We delivered a significant level of high-quality leasing outcomes, focused on enhancing the retail mix of each centre and reducing our income at risk, while simultaneously negotiating favourable leasing spreads which support current and future [net property income] growth.
“Furthermore, we have continued to invest our capital to progress development approvals and execute project activity that will ultimately deliver long-term value to our stakeholders, despite near-term, heightened macroeconomic uncertainty.”