Vicinity Centres reports a robust third quarter for FY25, buoyed by record visitation at Chadstone’s new Market Pavilion and strong retail sales growth. The company now expects full-year earnings at the top end of guidance, underpinned by resilient portfolio metrics and strategic asset management.
- Record 107,000 visitors at Chadstone’s Market Pavilion grand opening
- Stable occupancy at 99.4% with leasing spreads holding at +3.5%
- Total retail sales up 2.4% in 3Q FY25, led by specialties and mini majors
- FY25 FFO and AFFO per security expected near top of guidance range
- Proforma gearing low at 27.5%, supporting ongoing growth investments
Strong Shopper Confidence Drives Growth
Vicinity Centres (ASX:VCX) has delivered a confident update for the third quarter of FY25, highlighting robust retailer and shopper confidence that is translating into positive portfolio performance. The recent grand opening of The Market Pavilion at Chadstone has been a standout event, attracting an impressive 107,000 visitors on the first Saturday post-launch, surpassing visitation figures from major shopping days in 2024 such as Black Friday and Black Saturday.
This surge in foot traffic has not only energized Chadstone but also contributed to a 49% year-on-year increase in visitation between late March and April, underscoring the precinct’s growing reputation as a food and lifestyle destination. Retailers within the pavilion and across the centre have reported positive feedback, benefiting from elevated shopper engagement and innovative services like the AI-powered Recipe Planning Tool and enhanced parking solutions.
Portfolio Metrics Remain Resilient
Vicinity’s portfolio metrics continue to impress, with occupancy steady at 99.4% and leasing spreads maintaining a healthy +3.5% year to date. Total retail sales grew by 2.4% in the quarter, driven primarily by specialties and mini majors, with standout categories including Leisure, Jewellery, Retail Services, and Homewares. This growth has been achieved despite challenges such as the timing shift of Easter and adverse weather events, reflecting the underlying strength of Vicinity’s assets and tenant mix.
Notably, Chadstone itself returned to positive sales growth following active tenant remixing and store expansions, further boosted by the Market Pavilion’s opening. The company’s focus on premium assets and strategic tenant alignment appears to be paying dividends, with CBD centres also delivering strong sales growth of 8.8% across mini majors and specialty stores.
Strategic Developments and Financial Outlook
On the development front, fit-outs for Adairs and Kmart’s corporate offices at Chadstone are progressing well, with occupancy planned for June 2025. Meanwhile, the transformational redevelopment of Chatswood Chase remains on track for a phased opening starting in the second quarter of FY26, promising to further enhance Vicinity’s portfolio quality and income potential.
Financially, Vicinity has successfully divested non-core assets such as Roselands and Carlingford Court at or above book value, helping to maintain a conservative proforma gearing ratio of 27.5%, comfortably within the lower end of its target range. This financial discipline supports the company’s ongoing growth agenda and investment strategy focused on premium retail assets with strong upside potential.
Reflecting these positive trends, Vicinity now expects its FY25 Funds From Operations (FFO) and Adjusted FFO (AFFO) per security to be at the top end of its guidance ranges, 14.5 to 14.8 cents and 12.3 to 12.6 cents respectively. However, the company anticipates distributions will remain at the lower end of the target payout range of 95-100% of AFFO, signaling a cautious but confident approach to capital management amid evolving economic conditions.
Bottom Line?
Vicinity’s strong Q3 momentum and disciplined growth strategy set the stage for a promising FY26, but investors will watch closely for economic shifts that could test this resilience.
Questions in the middle?
- How will the Chatswood Chase redevelopment impact Vicinity’s income and valuation in FY26?
- What is the potential effect of economic headwinds on Vicinity’s leasing spreads and occupancy going forward?
- Can the innovative shopper services at Chadstone’s Market Pavilion sustain elevated visitation and sales growth?