Westfield owner’s next big play is apartment towers

“We have been for a long time a company that’s focused on capturing people’s time and we do that in a variety of ways, but our focus is on having more people come to our destinations and spending longer with us,” Mr Rusanow told The Australian Financial Review.

“The ultimate part of that business is eventually having people spend all of their time at our destinations and, effectively, that’s what the residential opportunity does.

“It’s fair to say that we’re in extensive dialogue with planning departments, state governments and local councils on housing supply needs and how we can contribute. This is something we are exploring across the portfolio.”

Scentre has so far secured received rezoning approvals at Westfield Hornsby in Sydney’s upper north shore and Westfield Belconnen in Canberra as part of state and territory governments’ efforts to fix their housing shortages.

Those two rezoning decisions pave the way for several 53-storey residential towers to be built at Hornsby and 28-storey towers at Belconnen, allowing the shopping centre operator to potentially build more than 4000 new homes.

Rusanow said population growth – which is driving demand for more housing density – had already given Scentre a revenue boost at its shopping centres, with more shoppers visiting and better sales metrics.

For its full-year result, which aligns with the calendar year, Scentre increased its customer visits by 14 million year-on-year to 526 million. Sales rose by $544 million to a record $29 billion, boosting in turn Scentre’s appeal to prospective tenants.

Among Scentre’s 42 shopping centres, 19 were fully occupied while another five only had one vacancy. The lack of supply in retail space has allowed the shopping centre landlord to record leasing spreads – the difference in rents between old and new agreements – of positive 2 per cent.

Funds from operations, the property sector’s preferred measure for earnings, increasing by 3.5 per cent to $1.13 billion year-on-year which equates to 21.82¢ per security.

That result was at lower end of Scentre’s previous guidance and its stock had traded 4.1 per cent lower by lunchtime, dipping 15¢ to $3.49.

Scentre’s post-tax net profit soared to $1 billion, up from $174.9 million a year ago, after the steep portfolio writedowns in value tapered off. A year ago, its portfolio had been hit by a $981.9 million valuation decline as part a broader downturn felt across the commercial property sector.

The prospect of a squeeze on retail space nationally has been positive for Scentre, with its share price rising 15.8 per cent over the past 12 months.

According to CBRE data, gross lettable area per capita is forecast to fall by 5 per cent in the decade to 2033, while retail sales are forecast to grow 31 per cent.

“We really have two major avenues of growth. Clearly, our focus on giving people reasons to come is fuelling growth in what we would call our existing business. I believe we can continue to grow occupancy and continue to grow rents,” Rusanow said.

“But longer term, the macro theme, which is the shortage of housing, is something we believe that we have an ability to contribute to [through] the solution to the housing supply shortage because of the strategic locations of each of our 42 destinations, and the ability to co-locate where people live to where people spend time.”