The Vicinity Centres (ASX: VCX) share price is trading 1.98% higher at $2.58 late on Wednesday. This comes after reports the company is aiming to target the negative effect online shopping has had on retailers as it refurbishes The Glen shopping mall.
How will Vicinity fight online shopping?
According to a report in The Sydney Morning Herald, Vicinity is taking an active role in developing The Glen shopping mall to curb the negative impact online shopping has had on retailers. The retail fund manager is close to completing the centre in Melbourne's eastern suburbs, which will feature 60 new stores including a refurbished David Jones.
In a bid to fight back against online shopping, the shopping landlord is encouraging retailers to offer more services such as personal shopping, click and collect, beauty bars and concierge services. In addition, retailers such as David Jones will be offering larger floorspace for exclusive brands such as Country Road, Politix and Mimco.
According to the article, Vicinity has sold the air rights above the refurbished mall to Golden Age Group who will construct a three-tower Skygarden complex. The development will feature 555 apartments and a resident-only garden and is designed to offer greater convenience and foot traffic to retailers. The complex is scheduled to be completed by 2021 and has already pre-sold 60% of the apartments.
Creating destination centres
Earlier this year Vicinity addressed the headwinds facing the retail sector by focusing on redevelopment and higher performing assets. In order to compete with the surge in online shopping, Vicinity strategized to create a portfolio of 'destination centres' that offer greater services and attractions than normal retailers.
Vicinity currently has a portfolio of 50 destination malls including Australia's largest mall, Chadstone in Melbourne. Other notable assets include CBD attractions like the Queen Victoria Building and The Galleries in Sydney and productive DFO outlets around the country.
In its March quarter update, Vicinity revealed sales growth across its landlord holdings to be 3.3%, down from 4.2% in December. By repositioning its assets and focussing on market-leading destinations Vicinity hopes to deliver more sustainable growth over the long term.
Vicinity reaffirmed its full-year funds from operations guidance of 18.0 to 18.2 cents with the distribution payout ratio expected to be at the upper end of the target range of 95% – 100%.
