Solid Start Out the Gate
Vicinity Centres +1.2% opened FY26 on a steady footing, posting 4.4% portfolio sales growth in the September quarter, supported by firm tenant demand, near-full occupancy, and strong performance from discretionary categories. Premium assets such as Chadstone and Chatswood Chase continued to draw higher visitation and deliver firmer rents, reflecting the payoff from Vicinity’s ongoing asset reshaping.
In our last tech update on the 2nd of September, we noted that “Similar to other REITs, Vicinity has confirmed a breakout above $2.40 and extended upwards to five-year highs above $2.60. We believe the advance is sustainable with the RBA now in an easing cycle, and commercial property prices are likely at an inflection point. We anticipate VCX to retest the highs above $3.40 and certainly the next resistance cluster at $3 over the coming year.”
Similar to other REITs, Vicinity has confirmed a breakout above $2.40 and extended upwards to five-year highs above $2.60. We believe the advance is sustainable with the RBA now in an easing cycle, and commercial property prices are likely at an inflection point. We anticipate VCX to retest the highs above $3.40 and the next resistance cluster at $3 in 2026.
Trading Update – 1Q26
Vicinity Centres enters the new fiscal year riding a wave of operational success and growing investor confidence, anchored by a strong September quarter performance. The September update reveals that Vicinity delivered 4.4% sales growth across its total portfolio in the first quarter of FY26, maintaining the positive momentum seen in the prior two quarters. Growth was broad-based and all retail categories contributed, but discretionary segments such as specialties and mini majors stood out, achieving a robust 5.9% rise, while fashion sales specifically recorded a 4.4% increase – signalling resilient consumer appetite despite broader macro volatility.
Portfolio fundamentals remain exemplary. Occupancy was stable at 99.5%, and the leasing spread – a measure of rent uplift on new and renewed leases – rose to +2.9%, demonstrating landlord pricing power amid sustained tenant demand. The specialty occupancy cost ratio, at 14.2%, continues to provide headroom for future rent increases, aided by Vicinity’s ongoing portfolio remixing and targeted upgrades across its 51 assets.
Source: VCX AGM Presentation
The September quarter update also underscores the payoff from Vicinity’s multiyear capital allocation strategy, which has pivoted the asset mix toward premium properties. The group exceeded its asset sales target in FY25, raising nearly $460 million, and shifted from 51% to 66% premium assets (by value) since June 2022. Incremental investments and high-profile launches, such as Chadstone’s acclaimed Market Pavilion and the successful stage 1 reopening of Chatswood Chase, are invigorating major centres and fuelling visitation rates. Chadstone, for example, delivered 5.9% quarterly sales growth with a dramatic 35% uplift in visitation, underlining the asset’s status as Australia’s flagship retail destination.
Luxury, leisure, and entertainment sales were especially strong, with luxury retail revenue rising 3.8% in 1Q and certain categories like jewellery and leisure up 7.5% and 11.2%, respectively. This expansion is alongside ongoing advancements in premium and mixed-use pipeline developments, including the revitalisation of Galleria in Perth and mixed-use transformations at Box Hill Central and Buranda Village, offering visible long-term growth drivers.
Management has reaffirmed earnings guidance for FY26, targeting 15.0–15.2 cents of FFO and 12.8–13.0 cents of Adjusted FFO per security, with a payout ratio of 95–100%. Vicinity’s gearing remains conservatively managed at 26.6%, and the group’s balance sheet strength is a competitive advantage in the current environment. Notably, these forecasts rest on an explicit assumption of no material deterioration in economic conditions, signalling the board’s confidence but also vigilance against downside risk.
From a sector perspective, Vicinity’s September quarter performance outpaced most ASX-listed retail REITs, both in terms of sales growth and operating metrics. Analysts highlight the group’s persistent high occupancy, growing re-leasing spreads, and premium assets weighting as key differentiators in a market where consumer sentiment and discretionary spending are showing measured improvement. Stabilising interest rates and moderating inflation are further supporting retail trading conditions, and Vicinity’s concentration in metropolitan catchment areas with dense and growing urban populations provides insulation from regional economic volatility.
CEO Peter Huddle credits the success to proactive asset management, continuous facility upgrades, and a deep understanding of changing shopper preferences. Ambience enhancements, contemporary tenant mixes, and the integration of office and hospitality have played a pivotal role in maintaining centre vibrancy and maximizing both visitation and dwell times.
Looking ahead, Vicinity’s priorities remain clear: remixing its portfolio for optimal performance, accelerating premium and mixed-use asset exposure, rigorously controlling costs, and supporting further rental growth through both annual escalations and positive leasing spreads. Development completions at Chadstone and Chatswood Chase will be closely monitored, with anticipated benefits both to asset valuations and to recurring income as new luxury and category-leading tenants open across these centres.
Risks, while present, appear manageable given the current operating environment and Vicinity’s balance sheet discipline. Management’s tone is one of cautious optimism, emphasizing execution discipline and capital stewardship while remaining alert to exogenous shocks – such as shifts in economic growth, inflation surprises, or changes in the competitive landscape.
Summary
For investors, the September quarter update delivers compelling evidence that Vicinity Centres is not only weathering industry headwinds but taking full advantage of favourable structural and cyclical forces. With sales momentum, tenant demand, and operational excellence on display, VCX’s portfolio appears positioned for both steady income and long-term value appreciation.
The reaffirmed guidance, premium asset focus, and proven management execution support our ongoing BUY rating on Vicinity Centres (ASX: VCX) especially for Members without exposure. The company remains a solid addition for Members seeking exposure to Australia’s most resilient shopping centre operator, supported by quality, scale, and a clear roadmap for future growth.
