“This in large part has resulted in Vicinity’s December 2020 valuations softening 4 per cent,” Mr Kelley said.
Most of Australia’s malls stayed open during the pandemic, but shoppers were forced to stay home under lockdown laws, and foot traffic and revenue across the sector plummeted.
The outbreak struck a heavy blow to investors in the nation’s income-earning real estate trusts. From February to March last year, the ASX 200 REIT index lost about half its value but has since clawed its way back to settle at around 80 per cent of its February peak, weighed down by retail and office focused trusts.
“While we remain cautious on the impact of potential future outbreaks of COVID-19 on retail trade, and the challenges of the evolving retail environment, we are encouraged by a number of factors,” Mr Kelley said.
These include Australia’s successful efforts to contain outbreaks, the strong bounceback in customers during Black Friday and over Christmas, and a potential rollout of a virus-busting vaccine.
But the group warned its CBD centres in Brisbane, Sydney and Melbourne will continue to be impacted by the current low levels of tourism and office occupancy.
“We welcome the efforts of governments and the private sector stepping up the return to CBDs for workers and visitors in 2021,” he said.
Sydney’s office towers only managed to regain about half their normal workers by the end of last year, while Melbourne’s long lockdown kept most workers out of its city centre – and shopping elsewhere. Only now are a trickle of workers starting to re-enter city buildings.
Vicinity’s neighbourhood and sub regional shopping centres, which are skewed to non-discretionary retail, are performing much better, proving to be more resilient to valuation declines and giving the group a higher income yield.
Outside of the CBDs, customer activity is generally returning to near pre-COVID levels, the landlord said. In December 2020, visitation across Vicinity’s portfolio averaged 88.4 per cent of the previous year.
Shares in the company fell by 2.5 per cent over the course of morning trade, to around $1.54.
Simon Johanson is a business journalist at The Age and The Sydney Morning Herald.