Scentre Reaffirms 2026 Targets as Westfield Sales and Occupancy Hold Firm

David Jones Exposure Remains Contained for Scentre

The immediate question hanging over Scentre Group (ASX:SCG) is not whether its Westfield centres are busy. It is how much damage a troubled David Jones tenancy could cause. On the figures disclosed in this operating update, the answer appears limited, though not irrelevant: the department store occupies about 200,000 square metres across 17 Westfield destinations, but generated $45 million of gross rent for Scentre in calendar 2026, equal to roughly 1.8% of group gross rent and 3.6% of annualised funds from operations.

David Jones paid all rent through 30 September 2026. Scentre also holds bank guarantees of about $30 million on its share of the stores, equivalent to eight months of gross rent, which can be applied against unpaid rent. Those figures do not resolve the future of the tenancy, but they give Scentre some protection if the situation deteriorates.

Westfield Visitation and Leasing Metrics Improve

The operating engine remains notably steady. Customer visits reached 554 million over the 12 months to 1 November, up 3.1% or 17 million on the prior comparable period. For the year to 30 September, business partner sales rose by $1 billion to $30.5 billion, while sales growth accelerated to 3.5% in the September quarter. Specialty store sales performed better, increasing 4.6% over the quarter.

Occupancy held at 99.8%, described by Scentre as its highest level in more than a decade. The group completed 2,085 leasing deals in the nine months to September, securing average specialty rent escalations of 5.6% and releasing spreads of 3.7%. Westfield membership also grew 10.8% to 5.4 million, adding another measure of customer engagement to the update.

The performance was uneven across categories. Health and beauty, jewellery, fashion, technology and appliances all recorded solid growth over the nine months, while footwear declined 4.3% and leisure and sports increased only 0.4%. New Zealand was the strongest regional performer, with portfolio sales up 8.7% over the nine-month period, compared with 3.7% across the total portfolio.

Redevelopments and Strategic Land Add Future Capacity

Scentre is continuing to spend behind its most productive destinations. The $240 million Bondi redevelopment is due to open its upgraded Event Cinemas and new Kingpin entertainment offer in December, with the rest of the dining and lifestyle precinct scheduled to open progressively from 2027. At Penrith, the $30 million entertainment and cinema expansion is fully leased and is expected to open progressively from the second quarter of 2027.

At Tuggerah, the former David Jones space is being repurposed for new retailers. JD Sports and rebel have opened, with visitation up 6.2% in the eight weeks since opening, while TimeZone is planned for the second quarter of 2027. Separately, an expression of interest for up to 1,300 dwellings at Westfield Eastgardens has been accepted for progression as a State Significant Development through the NSW Housing Delivery Authority.

Asset Sale and Debt Issue Support Capital Strategy

Capital recycling has added flexibility. Scentre settled the sale of a 50% interest in Westfield Mt Gravatt to Australian Retirement Trust for $882.5 million in late September, after the transaction was announced earlier in the year in the Westfield Mt Gravatt joint venture. The group retains its 50% interest and management role.

Scentre also issued US$750 million of 10-year guaranteed senior notes, equivalent to A$1.079 billion, with the principal and interest swapped into a floating-rate Australian dollar liability at a margin of 141 basis points over three-month BBSW. Available liquidity stood at $3.4 billion at 31 October, which the group says covers maturities through the second half of 2029.

2026 FFO and Distribution Targets Reaffirmed

Management reaffirmed its target for 2026 funds from operations of at least 23.79 cents per security, representing growth of at least 4.25%, subject to no material change in conditions. Distributions are expected to rise by the same 4.25% to 18.473 cents per security. The target had been raised at the half-year result, when Scentre reported stronger earnings and maintained 99.8% occupancy, as described in the half-year earnings upgrade.

The update contains no full income statement or balance sheet, so the operating figures are not a substitute for the next detailed financial result. The key test is whether high occupancy, rent escalations and resilient specialty sales can continue to offset funding costs and redevelopment spending, while any change in David Jones' rent payments remains a contained issue rather than a new drag on cash flow.