Retail property stocks impressed investors with the positive reporting season and large-scale landlords releasing better-than-expected spreads with robust net operating income growth, according to JPMorgan analysts.
Investors are now seeing malls in a new light and as having profit potential, which is motivating buyers to snatch up shopping centre assets but only at a good price to ensure they receive healthy returns to pass on to their investors.
New buyers, however, are up against regional malls being among Australia’s tightest-held asset classes, with only 11 major regional shopping centre sales taking place in NSW over the last ten years.
As a leading shopping centre portfolio, Scentre manages 42 Westfields over the Australasia region and has shown a robust operational performance.
Scentre Chief executive Elliott Rusanow shared that half of their Westfield malls business saw an increase in 9.1% or $13.1 billion in sales with centres running 13.6% above normal over 2019.
“Demand for space in our Westfield destinations continues to be strong with occupancy increasing to 99%,” Rusanow said.
Whereas Vicinity Centres saw sales rise by 8% year-over-year due to several factors like increasing the retail mix in its centres and ensuring lease spreads were favourable to strengthen income growth said chief executive Peter Huddle.
Describing the Vicinity outcome, Citi analyst said: “Although we do expect consumer pressure especially within the lowest-income households as a result of higher interest rates and inflation, Vicinity has performed well in reducing the exposure to short-term leases transitioning more than 200 shops from short-term to long-term leases.”
Citi analysts also said that Vicinity’s leasing spreads show a nice uptick of 0.3% but they predicted things to turn marginally negative due to consumer pressures.
With several large lendlease transactions in process like Haben potentially buying the Cairns Central complex for close to $400 million, these sales would represent some of the largest Australian shopping centre transactions since 2022. They also would represent a milesone in the industry.
Other potential sales in process include a stake in the Westfield Whitford City up for purchase resulting in bids of over than $200 million and 50% of the Westfield Tea Tree Plaza is up for sale by a former AMP Capital fund which could bring in a projected $350 million.
Deals like these and the Rockingham Centre going for $180 million and the Craigieburn Central centre going for $300 million, represent a large amount of deals demonstrating not only the far-reaching rerating of major retail property assets but their attractiveness to investors.
