This year, Australians and international tourists will make 500 million visits to one of our sixty-plus Vicinity Centres’ destinations. They will spend $17 billion across every state of Australia. They will be connected on more than 12 million individual devices, make 60 million views of our websites and 1.2 million of them will follow us on social media.
This is why we are focused on creating market-leading shopping, dining and entertainment destinations as we believe the future of our centres is connected retail, integrating our unique physical and digital assets to focus on elevated customer experience and convenience to meet the behaviour of today’s evolved consumer.
With a national portfolio that includes Australia’s number one retail, dining and entertainment destination at Chadstone, unrivalled premium CBD assets across Australia’s three largest CBDs on the eastern seaboard and Australia’s number one outlet centre portfolio, we connect customers, our retailer partners and brands.
Today’s reality is the best brands want to be in leading locations. As a recent International Council of Shopping Centres (ICSC) report states, ‘Digitally empowered consumers may enjoy an increasing array of methods to buy what they need, but physical stores remain the dominant channel for building, growing and sustaining brands.’
Rightly, retail is now less focused on transactions and more about connecting with the consumer to create a truly unique, memorable experience. Australians increasingly want destinations that offer experiences such as dining, entertainment, wellness, beauty and leisure services. Those centres, brands, retailers, service providers and hospitality leaders that cater to enjoyment and experience are and will remain the winners.
We also need to leverage the growth of our nation as a global destination. Next year, international visitation will continue to grow with an expected ten million international tourists visiting Australia spending $40 billion. 70% of that spend will be from tourists from Asia, which is now our nation’s largest market for total visitor spend and visitor nights.
Our portfolio of destination centres that have a curated mix of retail, dining, leisure and entertainment such as Chadstone and The Glen, are strategically well-positioned to meet these evolving customer needs.
There are many other trends, both macro and micro, which mean we must adapt to stay relevant to how Australians are now living their lives, spending their time and money. Our population is ageing, people are moving closer to transport hubs, and more people than ever are living in high rise. We are a lifestyle nation where most want to live near the ocean. Eighty per cent of us live on the eastern seaboard and 60% in five capital cities.
With this context we have set a clear direction for the future. Vicinity’s strategy is to create market-leading destinations, realise mixed-use opportunities and expand our funds management business.
At our interim results we reported strong affirmation of this strategy, which capitalises on Vicinity’s unique positioning in the Australian retail market.
Put simply, Vicinity owns Australia’s number one retail, dining and entertainment destination in Chadstone. We have an unrivalled CBD retail offer across Australia’s east coast in Brisbane, Sydney and Melbourne where 80% of Australians live. We have Australia’s number one outlet centre portfolio, the DFOs with six centres in four capital cities. We are Australia’s leading landlord for the growing category of luxury retailers. And the growth potential of these assets and our portfolio is very strong.
As we sharpen our focus on repositioning our portfolio, we continue to make strong progress on our development pipeline working on high-returning opportunities.
Australia’s number one retail, dining and entertainment destination, Chadstone, continues to deliver high quality results. Attracting more than 23 million visitors annually, including 450,000 international visitors and with foot traffic growing by 7%, this places Chadstone among the world’s leading retail destinations. With more than $2 billion of sales last year, it is the sixth largest mall in the world by sales. The centre offers 550 stores and is now home to more luxury brands than any other shopping precinct in Australia.
Our international retailers, expanded luxury, quality dining and entertainment is one of the key drivers of our growing visitation.
We know our customers are always looking to Chadstone for the latest experiences and brands. In 2018, we further enhanced Chadstone’s premium offering by expanding our luxury precinct introducing Hermes and a new Gucci flagship, welcoming Victoria’s Secret flagship – Australia’s first full-line store, opening a lower ground dining atrium with eight casual dining options, launching a new youth and leisure precinct and expanding our dining offer with new destinational dining Calia and Yu Kitchen opening in December, including an outdoor dining terrace.
The five-star $130 million MGallery by Sofitel hotel will open later this year, offering visitors premium accommodation and high-quality services to enhance their visit to Chadstone. Master-planning outlines the significant potential of this asset and includes additional retail, commercial towers and entertainment areas to leverage the success of this retail and commercial hub.
In October 2018, we expanded our DFO portfolio into Western Australia, opening DFO Perth. When we planned the greenfield development, we knew sales would be strong, but we didn’t anticipate the overwhelming reaction we received. Not only was the centre fully leased with a high-quality mix of first-to-market retailers, and popular luxury and premium retailers such as Coach, Calvin Klein and Hugo Boss but shoppers also queued to get in the doors with more than 240,000 visitors in the first three weeks. The project delivering an improved development yield of more than 12% and an IRR of more than 17%, underpins a 40% lift in valuation at 31 December 2018. Naturally, we have plans to further expand our DFO portfolio.
Our retail and mixed-use development continues at The Glen in Melbourne’s south-east. In late 2017, we opened stage one – a bustling fresh food market hall anchored by a new ALDI, new format Woolworths and Coles plus more than 60 food and specialty retailers. Last year, we launched The Food Gallery, a contemporary dining destination with 16 casual dining restaurants and cafés and unveiled a new fashion and lifestyle precinct offering customers 80 new stores including international brands UNIQLO and H&M.
Later this year, a new-format 8,000m2 David Jones store, alfresco dining and 60 specialty stores will open, and more than 500 apartments will be built by our residential partner by 2021. Investment in The Glen will ensure that the centre is catering to the growing affluence of the local trade area and can deliver the right mix of retailers to create a market-leading destination.
In Brisbane we are nearing completion of our $36 million redevelopment of QueensPlaza. In December 2018 we unveiled international luxury brand Dior and iconic Australian designers Zimmermann, Camilla and Scanlan Theodore, further enhancing QueensPlaza’s position as Brisbane’s leading luxury retail and lifestyle destination. This year, more international luxury stores and Australian designers will open their doors and we will also introduce complementary premium dining experiences with a balcony overlooking the Queen Street Mall, which hosts more than 26 million visitors a year.
We have a major redevelopment planned at Chatswood Chase Sydney. The expanded centre will have a large collection of premium retailers, enhanced food and dining experiences and is positioned to benefit from its prime location in one of Australia’s most affluent trade areas, strong population growth and the growing international tourism market.
In Western Australia, we are progressing our $63 million expansion at Ellenbrook Central. Situated within one of the strongest growth corridors in the state, the project will reinforce Ellenbrook Central as a dominant centre for outer north-eastern Perth, introducing a new Kmart, three mini majors, 16 new specialty retailers and two new pad sites.
Box Hill Central is a strategic, high quality asset in our portfolio given its location in one of Melbourne’s largest commercial business hubs, its 5.5-hectare size and the demands of the growing community. It is experiencing unprecedented growth, driven by private investment and development (residential and commercial) and also supported by significant investment associated with the growth of health and education facilities. We are planning a significant redevelopment at Box Hill Central to create a modern retail destination and extensive mixed-use development outcomes to be integrated into the transport network.
As well as Box Hill, and in addition to further retail expansion, to capitalise on the opportunity of Australian population growth and the need to provide housing, employment and services in convenient, established locations we are focusing on a select number of large, strategic, high-value mixed-use projects at Chadstone, QueensPlaza and Victoria Gardens. We are also progressing plans around other smaller non-strategic sites to gain mixed-use entitlement, with the development rights potentially being sold off to release capital for reinvestment into Vicinity’s destination portfolio.
To enhance the customer experience and support our retailers and brands, we are continuing to leverage digital. One of our fastest growing new revenue streams is combining investment in digital with the scale of our properties. Leveraging these assets allows us to create targeted products, services and experiences for shoppers, build stronger relationships with our retailer partners and create additional income and greater efficiencies for Vicinity. For instance, our media income increased by 18% in the December half, with 30 new internal digital screens and six new external billboards coming this year.
We are proud to be building Australia’s largest-ever property solar program, investing $73 million, with eight projects now built and an additional 14 projects under construction. We are at the leading-edge with our integrated energy strategy, trialling bi-facial solar panels, solar glass, battery storage and blockchain energy technology to further reduce our reliance on grid electricity, better utilise its physical assets for solar energy generation and drive future value.
Supporting our uniquely positioned Flagship portfolio and high-value development pipeline, we know our strength is our people. We recently announced leadership changes as the next significant step in Vicinity’s transformation to unlock potential and deliver strong and sustainable growth.
Our people are firmly focused on leveraging our strengths and positioning Vicinity for the future by strengthening our intensive asset management approach, elevating strategy, innovation and digital, and further embedding a high-performance culture.
We are looking forward to the year ahead with our team and our unrivalled Flagship assets, we are well placed to realign our business to focus on the successful and swift execution of our strategy.
About Vicinity Centres
Vicinity Centres is one of Australia’s leading retail property groups with a fully integrated asset management platform and $26 billion in retail assets under management across 66 shopping centres, including some of Australia’s most recognisable CBD properties – Emporium Melbourne, The Queen Victoria Building and Strand Arcade in Sydney and Myer Centre Brisbane and QueensPlaza.
Chadstone – The Fashion Capital in Melbourne’s south-east is co-owned by Vicinity Centres. Chadstone is the largest shopping centre in the southern hemisphere and, with more than $2 billion in annual sales, remains one of the world’s best shopping, dining and entertainment destinations which attracts more than 23 million people each year.
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