Highlights

• Vicinity Centres reported portfolio occupancy of 99.6% and positive leasing spreads of 5.1% for the March 2026 quarter.

• Funds from operations (FFO) guidance of 15.0 to 15.2 cents per security and adjusted FFO guidance of 12.8 to 13.0 cents remain on track.

• The company agreed to acquire Eastern Creek Quarter in western Sydney for $400 million, increasing gearing by approximately 200 basis points.

• Specialty productivity increased to around $13,500 per square metre, while occupancy costs stood at 14.3%.

• Vicinity Centres shares traded at $2.66 on 28 July 2026, rising $0.040 or 1.53% during the session.

Vicinity Centres (ASX:VCX) is showing signs of improving operating conditions across its retail property portfolio, with occupancy levels approaching full capacity and new leasing activity achieving higher rental rates.

The owner and manager of major Australian shopping centres, including Chadstone and Emporium Melbourne, has benefited from stronger tenant demand and improved retail activity.

The company’s March 2026 quarterly update highlighted improving leasing conditions, although consumer spending trends and interest rate movements remain important factors for future performance.

Occupancy Reaches 99.6% as Leasing Spreads Improve

For the quarter ended 31 March 2026, Vicinity reported:

  • Portfolio occupancy of 99.6%.
  • Positive leasing spreads of 5.1%.

The leasing spread measures the difference between rental rates on new leases and the previous rent level.

The latest leasing spread compares with:

  • Positive 2.5% for FY25.
  • Portfolio occupancy of 99.5% at June 2025.

The improvement indicates stronger tenant demand and increased rental pricing power across the portfolio.

Retail Sales Growth Supports Tenant Performance

Vicinity reported total portfolio retail sales growth of 3.4% during the March quarter.

Performance across categories included:

  • Discount department stores: up 5.1%.
  • Mini majors: up 3.7%.
  • Apparel and footwear: up 3.7%.
  • Outlet portfolio sales: up 2.7%.

Chadstone, one of Australia’s largest shopping centres, recorded total sales growth of 4.2%, with specialty and mini major categories increasing 4.6%.

Specialty productivity also improved, reaching approximately $13,500 per square metre compared with $13,037 at June 2025.

However, occupancy costs increased slightly to 14.3% from 14.1% in FY25, indicating that rising rents are taking a larger share of tenant sales.

FFO Guidance Remains on Track

Vicinity maintained its FY26 guidance outlook.

The company expects:

  • FFO per security of 15.0 to 15.2 cents.
  • Adjusted FFO per security of 12.8 to 13.0 cents.

Adjusted FFO is a key measure for REIT investors because it reflects cash available after maintenance capital expenditure and leasing costs.

The company targets a payout ratio of 95% to 100% of adjusted FFO.

In FY25, Vicinity reported:

  • FFO of 14.8 cents per security.
  • Adjusted FFO of 12.59 cents.
  • Distributions of 12.0 cents per security.

Eastern Creek Quarter Acquisition Expands Portfolio

In May 2026, Vicinity agreed to acquire Eastern Creek Quarter in western Sydney for $400 million.

The asset includes:

  • Approximately 41,000 square metres of retail space.
  • A recently opened outlet centre.
  • Traditional retail facilities.
  • Large-format retail components.

The acquisition is expected to increase gearing by approximately 200 basis points.

Vicinity stated the purchase would be funded through existing facilities.

The transaction adds exposure to western Sydney growth, although the company has not disclosed acquisition yield details.

Understanding Vicinity Centres’ Business Model

Vicinity Centres operates as a retail property owner and manager.

The company manages approximately $25 billion of retail assets across 49 centres.

Its portfolio includes:

  • Chadstone in Melbourne.
  • Emporium Melbourne.
  • Chatswood Chase Sydney.
  • DFO outlet centres.
  • Regional and convenience-focused shopping centres.

The portfolio strategy combines premium destination assets with convenience-based centres anchored by supermarkets and essential retailers.

Vicinity also earns management income through partnerships where it manages assets without owning the entire property.

Financial Position and Balance Sheet

Vicinity’s FY25 results reflected improved property fundamentals.

The company reported:

  • Statutory net profit of approximately $1 billion.
  • Comparable net property income growth of 3.7%.
  • Net tangible assets of $2.40 per security.
  • Weighted average capitalisation rate of 5.61%.

Gearing stood at 26.6%, within the company’s target range of 25% to 35%.

During FY26, Vicinity raised approximately $654 million through debt markets, including:

  • A $500 million Australian medium-term note.
  • Approximately $154 million Hong Kong dollar private placement.

The fundraising extended weighted average debt maturity from 3.5 years to 4.6 years.

Debt hedging covered 89% of drawn debt in FY26 and 85% in FY27.

Why the Development Matters

The improvement in occupancy and leasing spreads suggests Australian retail property conditions have strengthened after several challenging years.

A 99.6% occupancy rate provides landlords with stronger negotiating positions, while positive leasing spreads can support future rental growth.

However, rental growth sustainability depends on tenant sales performance.

With occupancy costs already rising, continued rent increases may become harder if consumer spending slows.

The Eastern Creek Quarter acquisition also highlights Vicinity’s willingness to selectively expand, although increased gearing reduces financial flexibility.

Potential Growth Catalysts

• FY26 results on 20 August 2026 confirming FFO performance and property valuations.

• Continued leasing momentum and rental growth.

• Completion of Eastern Creek Quarter acquisition.

• Chatswood Chase leasing progress following redevelopment completion.

• Galleria redevelopment opening in Perth.

Risks and Challenges

Interest rates remain a major risk for Vicinity due to their impact on debt costs and property valuations.

While debt maturity has improved, higher financing costs could affect future distributions.

Property valuation risk also remains important. Changes in capitalisation rates can significantly affect net tangible assets.

Consumer spending trends are another factor. While sales growth has improved, stronger performance from discount retailers may indicate cautious household behaviour.

Development execution also remains a consideration, particularly as major redevelopment projects require ongoing capital investment.

What Investors Should Watch Next

The FY26 results will provide the next major assessment of Vicinity’s recovery.

Key areas include:

• Full-year FFO and adjusted FFO performance.

• Net property income growth.

• Portfolio valuation movements.

• Gearing following Eastern Creek Quarter settlement.

• Final distribution and payout ratio.

Conclusion

Vicinity Centres has demonstrated improving operating momentum, supported by near-full occupancy, stronger leasing spreads and steady retail sales growth.

The company’s portfolio is benefiting from stronger tenant demand, particularly across premium retail locations.

However, the recovery remains dependent on maintaining tenant affordability, managing debt costs and delivering value from acquisitions and redevelopment projects.

The FY26 results will provide further insight into whether improving retail conditions are translating into sustainable earnings growth.