Retail landlord Vicinity Centres plans to focus on its $2 billion development pipeline and boosting its share of the luxury market to offset any weakness in consumer confidence.
Over the past three months to the end of September, Vicinity reported that apparel, homewares and jewellery sales moderated, except for high-end brands, while food, homewares, general retail, leisure and mobile phones improved.
Supermarket sales also moderated over the past three months, while sales in the department store and discount department store sector were mixed. While the company tipped its new Fortress esports entertainment venue at Emporium Melbourne would boost sales from millennials wanting "experience" retail.
In its September quarter update, Vicinity chief executive Grant Kelley also confirmed the group and Salta Properties, as the joint owners of the $390 million Victoria Gardens Shopping Centre, had bought land adjoining the centre in Melbourne’s inner-city suburb of Richmond.
With the recent purchase of two plots of land on Burnley Street and Doonside Street totalling 3,400 square metres, the joint owners of the centre have consolidated land holdings to the south of the centre creating a strategic 1.3-hectare development site.
It comes as the $130 million, 250-room Hotel Chadstone Melbourne, which adjoins the super-size Chadstone shopping centre, gets set to open on November 1.
"Progressing our developments continues to strengthen portfolio performance and improve centre productivity, and we achieved a number of significant pipeline milestones during the period," Mr Kelley said.
"In August 2019, the final major stage of the $430 million redevelopment of The Glen, Victoria was completed. The centre now has more than 250 retailers, a new-format David Jones and a new indoor-outdoor dining precinct."
There will also be more than 500 residential apartments at The Glen in what is said it to be the largest air-rights deal above a retail centre in Australia.
Mr Kelley said for the three months to September there was an inflow of luxury retail tenants, including a new store by upmarket jeweller Tiffany & Co.
Specialty stores and mini majors, covering stores such as H&M and Priceline, witnesssed sales growth of 3 per cent, of which luxury retail growth was 34.7 per cent, or 5.1 per cent on a same-store basis.
Mr Kelley said there was evidence that the recent tax rebates and lower interest rates had started to flow through to sales.
But this was in contrast to Macquarie Equities analysts who said in a note on the September quarter results that there was "limited evidence of a stimulus-led recovery".
"Retail sales are yet to improve post stimulus measures. Further, with downward pressure on the distribution per security, and a buyback programme at a time of net tangible asset (NTA) moderation, we retain underperform," Macquarie Equities noted.
On a centre basis, sales at the flagship Chadstone centre rose 7 per cent, thanks to re-mixing of the tenants and new development, while sales at DFO outlet centres rose 4.2 per cent.
Vicinity shares rose 2.67 per cent to close at $2.69.