Westfields ring up record sales as malls come back into vogue
Scentre Group chief executive Elliott Rusanow.
Local Westfield owner the Scentre Group says sales are holding up despite the excessive cost of living, which is a sign that shopping centres have emerged from the tough conditions.
Landlords are now betting that tax cuts and lower interest rates next year will drive further growth, and big institutions already starting to buy up shopping centres.
Scentre chief executive Elliott Rusanow said the company was focused on attracting more people to its 42 Westfield centres and in the past quarter there was a 2.1 per cent lift on the same time last year to 8.7 million.
Sales for the nine months to the end of September hit $20.2bn – a 2.3 per cent bump on the same period in 2023. “Demand for space from a diverse range of business partners is strong,” Mr Rusanow said.
Portfolio occupancy rose by 300 basis points to 99.4 per cent and average leasing spreads were 1.7 per cent. Average specialty rent escalations were 5.5 per cent better in the nine-month period.
Scentre is making progress on its $4bn pipeline of future retail development opportunities. Work continues on the reconfiguration of department store space at Westfield Bondi and Westfield Burwood in Sydney, and Westfield Southland in Melbourne.
The expansion of Westfield Sydney is also advancing, as is the building of an office and luxury tower on a corner of Market and Castlereagh streets in Sydney’s CBD – a project it’s conducting with superannuation fund-backed Cbus Property.
Another five levels of luxury and high-end retail will be introduced, including a new Chanel boutique as part of the Westfield Sydney expansion. Other brands to join the centre include Moncler, Omega and Canada Goose.
Scentre has finished a $50m repurposing of former department store space at Westfield Mt Gravatt in Brisbane, where Uniqlo, Harris Scarfe, Powerhouse Gym and entertainment venues Area 51, Holey Moley and Hijinx Hotel are opening up.
The company has been active on the financing front. In September, Scentre issued $900m of subordinated notes in the Australian domestic market, with the proceeds used to complete the cash tender offer for $US656m of its outstanding subordinated notes.
It has also tapped wealthy investors as it raises capital to buy interests in its centres that are being sold off. It set up the $175m West Lakes Opportunity Trust with investment bank Barrenjoey. The trust purchased a 50 per cent share in Westfield West Lakes in Adelaide. Scentre will co-manage the fund, and remains as property manager and 50 per cent co-owner of the complex.
Scentre confirmed it expects funds from operations – a measure of earnings used by property companies – to be in the range of 21.75c to 22.25c per security for 2024, showing 3 per cent to 5.4 per cent growth for the year.
Citi analysts said the quarterly update was strong as it showed a re-acceleration of leasing spreads to 1.7 per cent, up from 1.1 per cent in the first half of 2024, as well as higher occupancy.
The hottest areas fro sales were in technology and appliances, health and beauty, leisure, sports and food retail. Citi said that rental escalations remain consistent at 5.5 per cent as part of the CPI+2 per cent average specialty rent escalations.
