Can Vicinity Sustain Growth Amid Rising Geopolitical and Retail Sector Uncertainties?
Vicinity Centres delivered a robust FY25 with statutory net profit surpassing $1 billion, driven by strategic premium asset acquisitions and successful retail developments. The company reaffirms its positive earnings guidance for FY26 amid sustained retail sales growth and high occupancy.
- Statutory net profit exceeds $1 billion in FY25
- Shift to premium retail assets with key acquisitions like Lakeside Joondalup and Chatswood Chase
- Completed major developments at Chadstone including The Market Pavilion and One Middle Road office tower
- Retail sales growth of +4.4% in Q1 FY26 with specialty and mini-major retailers leading
- FY26 earnings guidance reaffirmed with FFO per security expected between 15.0 and 15.2 cents
Strong FY25 Performance Anchored by Strategic Portfolio Shift
Vicinity Centres has reported a landmark financial year for FY25, with statutory net profit reaching just over $1 billion, nearly doubling the previous year’s figure. This impressive result reflects the company’s disciplined execution of a strategy focused on elevating the quality and growth potential of its retail property portfolio.
Central to this strategy was the acquisition of premium assets such as a 50% stake in Lakeside Joondalup in Western Australia for $420 million and the full ownership of Chatswood Chase in Sydney, acquired in 2023 for $307 million. These acquisitions, secured at prices likely below replacement cost, have already contributed to portfolio valuation uplifts and earnings accretion.
Development Milestones and Retail Sales Momentum
FY25 also saw the completion of significant developments at Chadstone Shopping Centre, including the launch of The Market Pavilion; a fresh food precinct that has exceeded sales and visitation expectations; and the One Middle Road office tower, which attracted high-profile tenants such as Adairs and Kmart. These projects have catalysed a new growth phase for Chadstone, reinforcing its status as Australia’s premier retail destination.
Further, the first stage reopening of the reimagined Chatswood Chase in October 2025 introduced over 60 retailers, including flagship stores from Apple, David Jones, and luxury brands affiliated with the Louis Vuitton Moët Hennessy Group. Early feedback from retailers and shoppers has been overwhelmingly positive, signaling strong future performance.
Robust Operational Metrics and FY26 Outlook
Operationally, Vicinity Centres maintained a high portfolio occupancy rate of 99.5% and achieved a leasing spread of +2.9% in the first quarter of FY26. Retail sales growth continued its upward trajectory with a +4.4% increase across the portfolio, led by specialty and mini-major retailers posting nearly 6% growth. The company’s occupancy cost ratio remains healthy at 14.2%, indicating room for further rent growth.
Reflecting confidence in the retail sector’s recovery and the company’s strategic positioning, Vicinity reaffirmed its FY26 earnings guidance, expecting Funds From Operations (FFO) per security to be between 15.0 and 15.2 cents. The distribution payout is targeted at 95-100% of adjusted FFO, underscoring a commitment to delivering steady income to securityholders.
Capital Management and Future Growth
Vicinity’s disciplined capital management was evident in FY25, with divestments of non-strategic assets exceeding $460 million, well above the $250 million target. These sales have funded growth initiatives and accelerated the portfolio’s shift towards premium assets, now comprising 66% of total portfolio value. The company also commenced major redevelopment works at Galleria in Perth, aiming for a revitalised entertainment and lifestyle precinct by Christmas 2026.
Board and management remain focused on maintaining a strong balance sheet, with gearing at a conservative 26.6%, providing a competitive advantage and flexibility to pursue future opportunities.
Bottom Line?
Vicinity Centres’ strategic focus on premium assets and disciplined execution positions it well for sustained growth, but investors will watch closely how evolving retail dynamics and geopolitical risks shape the outlook.
Questions in the middle?
- How will the ongoing redevelopment of Galleria impact Vicinity’s portfolio performance and earnings?
- What risks could geopolitical volatility pose to retail sales and leasing spreads in FY26?
- Will the strong early performance at Chatswood Chase sustain as the full redevelopment completes?