Vicinity Centres (ASX:VCX) is an Australian retail property group with Assets including Chadstone, Chatswood Chase, DFO centres and other shopping destinations. FY26 delivered higher FFO, occupancy and leasing spreads, while retail sales growth moderated during the second half. Management expects FY27 Earnings growth to benefit from completed developments, recent acquisitions and additional income from assets moving through stabilisation.

FFO Rises to A$700.1 Million

Vicinity reported funds from operations of A$700.1 million for FY26, compared with A$673.8 million in FY25. FFO per security increased to 15.21 cents from 14.79 cents and finished at the upper end of guidance.

Adjusted FFO per security also increased during the year, while the full-year distribution reached 12.40 cents per security. The payout represented 95.5% of AFFO.

Statutory Profit Includes Valuation Movements

Statutory net profit after tax increased to A$1.3912 billion from A$1.0046 billion. The FY26 result included A$691.1 million of statutory, non-cash and other items in addition to FFO.

Net tangible assets increased 7.7% to A$2.59 per security. Property valuation movements contributed to the difference between recurring earnings and statutory profit, which is why FFO remains an important measure for assessing underlying property income.

Retail Sales Growth Moderates in the Second Half

Total portfolio retail sales increased 3.3% in FY26.

Growth was 4.2% during the first half before moderating to 2.3% in the second half.

Vicinity attributed the slower second-half rate to cost-of-living pressures, interest rates, Inflation and geopolitical uncertainty.

Specialty and mini-major sales increased 4.0% for the year, with growth reported across retail categories.

Occupancy Reaches 99.6%

Portfolio occupancy increased to 99.6%.

Leasing spreads were positive 4.2%, while annual rental escalators averaged 4.8% on completed specialty and mini-major deals.

Vicinity also reported that the number of leases on holdover reached its lowest level since the group’s formation.

These metrics supported comparable net property income growth of 4.2%.

Specialty Occupancy Costs Remain a Key Indicator

The specialty occupancy cost ratio was 14.4% at the end of FY26.

This measures rent and related occupancy costs relative to tenant sales.

The ratio is relevant because continued rent growth depends partly on retailer profitability and sales performance.

If retail sales growth remains lower for an extended period, future leasing outcomes may become more sensitive to individual tenant economics.

DFO Eastern Creek Adds to the Portfolio

Vicinity completed the Acquisition of DFO Eastern Creek on 30 June 2026 for A$351 million.

The acquisition increased the group’s exposure to the Western Sydney market and expanded its outlet-centre portfolio.

Vicinity also acquired the remaining 75% interest in Uptown in Brisbane for A$212 million, giving it full control of the asset and allowing planning for a broader repositioning program.

Capital Recycling Continues

Vicinity divested A$327.2 million of non-strategic assets during FY26.

It subsequently entered binding arrangements to sell Taigum Square for A$120 million.

The asset sales are intended to recycle Capital toward properties that management believes can provide higher income growth or redevelopment potential.

This approach also helps fund acquisitions and development without relying solely on additional debt.

Gearing Remains Within the Target Range

Headline gearing was 26.1% at the end of FY26.

Pro forma gearing was 26.5%, incorporating the Uptown acquisition and announced asset sales.

Both measures remain near the lower end of Vicinity’s 25% to 35% target range.

The company also raised A$732 million of Debt during FY26 and increased weighted average debt Maturity to 5.1 years from 3.8 years.

Chatswood Chase Development Is Complete

Vicinity completed the A$625 million redevelopment of Chatswood Chase during FY26.

The project included an expanded luxury, fashion, fresh-food and dining offer.

Chatswood Chase is expected to contribute a full year of income in FY27 as the asset moves through stabilisation.

Management expects this incremental income to be one of the contributors to the higher FY27 FFO guidance range.

Galleria Is Scheduled to Open in November

The redevelopment of Galleria in Perth is expected to open in November 2026.

The project includes a redesigned mall, entertainment precinct, cinema, retail and dining areas.

Vicinity is also progressing works at Chadstone, including the consolidation and expansion of the MECCA offer, which is expected to open before Christmas 2026.

These developments contribute to the company’s FY27 earnings expectations.

FY27 Guidance Points to Faster FFO Growth

Vicinity expects FY27 FFO per security of between 16.0 and 16.2 cents.

This represents growth of approximately 5.3% to 6.6% from FY26.

AFFO per security is guided to between 13.9 and 14.1 cents.

Management has described FY27 as an inflection point because acquisitions, completed developments and asset stabilisation are expected to contribute more meaningfully to earnings.

Comparable NPI Growth Expected to Moderate

The FY27 outlook does not rely on a major acceleration in underlying rental growth.

Instead, development completions and acquisitions are expected to supplement organic property income.

This means execution on Chatswood Chase, Galleria, Uptown and the broader portfolio remains important.

Retail sales, occupancy and leasing spreads will also determine how much recurring income growth can be sustained.

Key Risks and Areas to Watch

Consumer spending remains an important variable because slower retailer sales can affect leasing outcomes and turnover-linked rental income.

Interest rates and Capitalisation rates can influence both borrowing costs and property valuations.

Development projects also carry construction, timing and leasing risks.

FY27 FFO, retail sales, leasing spreads, gearing and the contribution from completed developments will therefore remain key indicators.