Scentre, owner of the local Westfield mall empire, is bringing customers and sales have jumped.
Build-To-Rent needs a “really big pipeline” from the Labor government in order to combat the housing shortage, says Property Council of Australia CEO Mike Zorbas. “We’re looking at about 150,000 homes around the country over the next ten years,” he told Sky News Business Editor Ross Greenwood. “The government, as you know, has a million home target by 2029, they will not make that without bold moves like this.”
Shopping centres owners face the prospect of consumers reigning in their discretionary spending but have ridden the wave of customers spending in the wake of the pandemic.
Investors are still wary of the sliding values of large malls as a series of properties have failed to transact in recent years, and those that have sold have shown discounts, but shopping centres are still producing a healthy operational performance.
Scentre chief executive Elliott Rusanow said the company’s strategy to attract more people to its centres delivered strong operating performance in the early part of 2023.
Customer visitation jumped to 163 million in the first 17 weeks of the year, a rise of 20 million visits from the same time last year. Retailers in the centres had $6.4bn of sales in the quarter, a 14.4 per cent lift on the same quarter in 2022.
“Cash collections for the first four months were $864m, $64m higher than the corresponding period for 2022 and in excess of 100 per cent of gross billings,” he said. The centres are full, and the portfolio had occupancy at 98.9 per cent at the end of April.
Westfield shopping centre in Chermside, Brisbane. Picture: John Gass/NCA NewsWire
Scentre reconfirmed that funds from operations will be in the range of 20.75c to 21.25c per security for 2023, showing 3.4 per cent to 5.9 per cent growth for the year. Distributions are expected to be at least 16.5c a security for 2023, showing at least 4.8 per cent growth for the year.
Overall, specialties sales were up by 12.1 per cent, with food and services categories very strong. Dining jumped 26.3 per cent, health and beauty was up 20.7 per cent, and food retail lifted 13.4 per cent.
Sales of leisure and sports equipment were also up 12.7 per cent, with footwear, up 9.7 per cent, and fashion, lifting 9.7 per cent, as consumer spending recovered after the Covid-19-related restrictions lifted.
Major stores were not quite as strong but were up with a 9.1 per cent sales lift. Discount department stores lifted by 11.3 per cent and department stores by 10 per cent. Supermarkets were up by 9.4 per cent.
Citi analysts said that the update was supportive of the stable operational outlook, which should continue to support the specialty rent escalations in the portfolio. They said the rising interest rate environment and implications for capitalisation rates continues to be a risk to the sector and a focus with investors.
JPMorgan analysts said Australian regional mall rents had rebounded from the severe Covid-19 disruption and proven to be extremely resilient, far more so than equity markets and real estate valuers have been assuming. They said that net operating income should stabilise in 2023 in line with 2019 levels.
Scentre shares were down 0.5 cents to $2.84 in a slightly lower market on Thursday afternoon.