CEO Outlook: 2023 was published by Shopping Centre NewsCredit: Vicinity
Peter Huddle - CEO and Managing Director
The retail landscape continues to evolve and so do the needs of our customers.
As I look to the year ahead, the opportunities to help shape the future are plentiful and exciting. And the team at Vicinity is absolutely focused on delivering the best outcomes for all our stakeholders now and into the future.
Over the past 12 months, we have seen resilience within the retail sector and despite the uncertain economic outlook, shoppers have showed a willingness and capacity to spend in our centres. Particularly over the past six months, the sustained recovery and minimal Covid-impact has driven strong retail sales growth across our portfolio, with shoppers seeking in-person shopping experiences and retailers looking for the best locations to connect with their customers.
Over the past six months, shoppers have sought out personal shopping experiences.Credit: Vicinity
While we are mindful of the risk of a potential economic downturn, we are yet to see a material impact on our operating metrics. We are however, confident that we have the foundations in place and we are firmly focused on future planning.
Taking the learnings over the past few years and understanding how our customers’ needs are changing is critical to how we shape and plan for the future.
The future of retail for our customers
Staying close to our customers to both know and understand what they want and need will be key to our long-term success. Our team has spent considerable time researching what the future of retail looks like for our customers.
Well before the pandemic, consumer behaviours, demands and expectations were already changing; particularly with the rise of omni-channel retail and the millennial effect of need-it-now instant gratification and experience. The pandemic introduced and accelerated several new behavioural shifts that continue to inform and influence our habits and lifestyles including:
20-minute living - The preference to stay closer to home and support local for work, shopping and entertainment
Experience economy - An increased focus on shared and unique experiences beyond the retail experience and inclusive of the culture, community, and benefits of social experience
Conscious consumerism - Further interest in all aspects of sustainability
Last minute meets last mile - Expectation and demand for convenience and access to what consumers want, when and where they want it
The role of the physical store continues to expand
Our research shows that 86% of consumers expect to be able to buy what they want, when they want and how they want.
The digitally savvy consumers expect flexibility, seamlessness, and convenience when it comes to their shopping experiences. It’s important that we are supporting our retailers to adapt in ways that suit them and their customers.
We believe the omni-channel model actually increases the importance of a physical store presence. The role of the physical store is also expanding, which is in turn driving increasing leasing demand and increased occupancy.
Our research shows that 86% of consumers expect to be able to buy what they want, when they want and how they want.
Peter HuddleVicinity CEO and Managing Director
The role of the store is expanding to include showrooming, significant expansions in range of offers, provision for online order fulfilment and return of orders, and is overall, a more cost-effective and efficient means of customer acquisition.
We are often testing and trialling new innovations which are designed to make doing business easier, and shopping more enjoyable. We continue to trial concepts such as:
Drone delivery at Grand Plaza in QLD
Micro fulfilment centre at The Glen in VIC
Partnering with the AFC and Afterpay to launch and operate Edit Collection, a first of its kind retail concept store at Chatswood Chase Sydney
Connecting with our customers through our diverse portfolio now and into the future
Our national footprint of diverse retail assets positions Vicinity as a partner-of-choice with retailers who can leverage our network of convenience, CBD, DFO and premium centres to grow. This also enables us to meet the needs of our customers who are looking for different experiences and local retailers to support.
We know consumers are increasingly discerning and that their preferences are changing. They place a lot of value on their time and want to experience life in a fulsome way. And we know they also want amenity and connectivity.
Vicinity's Leasing team negotiated 833 deals in the past six monthsCredit: Vicinity Centres
Our leasing team executed its highest level of deal activity, negotiating 833 deals in the past six months. We introduced exciting, on-trend retailers that will drive greater customer visitation and sales, which we can expand across our national network of retail centres. We are committed to meeting the evolving needs of our customers and their communities with the right retail offering and experience.
Our team is focused on developing several of our retail assets into thriving retail, commercial and residential precincts through our $2.9b development pipeline.
Creating precincts that meet the needs of local communities is the way of the future; as the population grows and as people want to leverage their time better. Mixed-use precincts are developed to meet the every-day needs of people within a 20 or 30 min journey of their neighbourhood.
A mixed-use project at Bankstown Central forms part of Vicinity's $2.9bn development pipeline.Credit: Vicinity Centres
We have several larger-scale mixed-use developments, such as, Chadstone in Victoria, Bankstown Central in New South Wales, Buranda in Queensland that are creating mini-city opportunities – bringing work, life and play together.
The demand for CBD-quality workplaces at our retail centres continues as tenants realise the advantages of working near home and having access to outstanding amenity, without the commute. We have partnered with Hub Australia to open a co-working space at Box Hill, which opens early March, and have plans for co-working spaces above the retail centre at our Bayside centre. We also know employers are wanting locations that are close to great amenities is and we’ve seen this with Officeworks and Adairs moving their head offices to Chadstone’s commercial towers.
At the same time, some of our smaller retail modernisation projects are delivering leading customer experiences based on the local demographics.
Mornington Central introduced new fresh and specialty food retailers.Credit: Vicinity Centres
So, it is not a surprise that the majority of our retail developments completed recently involved major refurbishments of larger format fresh food markets including full range supermarket offers – further building on the experience and needs of our local customers. Our centres at Bankstown, Box Hill, Mornington, Northgate have included this new format, and now have Chatswood Fresh Food underway.
Our CBD locations will also play a key role in our future growth. These assets were the hardest hit over the past few years, but we have been very pleased with the increasing momentum, with visitation in the December quarter reaching 80% of 2019 levels.
We have seen a strong rebound in day tripper visits on weekends and our CBD assets have focused on creating even more reasons to come into town, through shared and unique experiences. And we continue to see international arrivals increase for migration, tourism, and education. International arrivals have surpassed 60% of pre-COVID levels, so we are optimistic that the momentum of CBD recovery will continue.
Creating a sustainable future
We believe that having a sustainable business is critical to creating long-term value for all our stakeholders.
Our sustainability program has been recognised on the global stage over the past few years, and it’s something we are very proud about as a team.
Knowing sustainability continues to be an increasing expectation from consumers, it provides even more reasons to ensure our decisions consider the impact on the environment and the broader social construct in which we operate.
GRESB ranked Vicinity as the Sector Leader of Australia and New Zealand for Listed Retail Shopping Centres and third globally in its 2022 survey for the second consecutive year. And, in the Dow Jones Sustainability Index annual survey, Vicinity ranked eighth out of more than 450 real estate companies, globally.
I am proud of our team’s commitment to sustainability and we will continue to evolve and execute our ESG strategy.
As we look ahead, there is plenty more to do as we truly operationalise and embed holistic sustainability practices across our business.
Our team are energised to deliver for our customers and stakeholders
We have the right strategy in place to deliver long-term growth and I am honoured and excited to be leading a strong team at Vicinity.
2023 for Vicinity will be centred around further building a high-performing team that is unashamedly customer centric, focused on property excellence, profitable growth, and disciplined capital management.
We are confident about the future and the role we can play in delivering for all our customers and stakeholders.
Vicinity is one of Australia’s leading retail property groups dedicated to shaping meaningful places where communities connect. It owns and manage some of the most recognisable and loved retail destinations across Australia. From small community shopping centres to world-class destination centres like the iconic Chadstone in Melbourne and Queen Victoria Building in Sydney. Vicinity’s vision is to prosper with our people and communities by creating Australia’s most compelling portfolio of retail-led destinations.