It has been a tough 12-month period for REITs like Vicinity Centres [ASX:VCX] with shopping centres forced to close due to COVID-19.
But there might be light at the end of the tunnel with the VXC share price rising 1.56% to $1.26 at time of writing on the back of a reported net loss for the half year.
With REIT leaders claiming that business and consumer confidence has bounced back, can we expect a return in their share prices?
Damage could have been worse
It seems today that investors are somewhat impressed by VCX’s financial performance despite posting a $394.1 million net loss in the first half of FY2021.
That’s a drop of 262.3% from 1H2020 net profit of $242.8 million.
What may have been a pleasant surprise is the relatively small drop in revenue, which fell 8.4% to $582.3 million.
And things look set to improve into the second half of the financial year.
VCX said, excluding Victoria and CBDs, they have posted two consecutive quarters of positive sales growth across their centres.
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Now, that might sound like cherry picking but it is actually a useful metric.
You see, vacancy rates in Australia’s two largest metropolitan areas have increased over the pandemic period.
Sydney now sits at 3.2% vacancies, while Melbourne has more than doubled its rate to 4.4%.
And with people moving to more rural or regional areas, it’s important for REITs to understand what some of their most valuable assets are.
Net property income for the half took a beating, shedding 21.5% to $344.4 million.
And VCX says CBD-based assets are the laggards of the bunch.
This is what the results tell us
It’s good to see REITs like VCX slowly start to retrace some of its losses — but who can tell how long it will take before its share price is back to pre-COVID levels?
There is no doubt we will see permanent changes to Australia’s real estate land due to the pandemic.
I mean just take a look at the booming housing market in Queensland and NSW.
Particularly in the regional areas.
Where we want to live is changing and how we want to shop is changing along with that.
If you’re interested in what the future has in store for the Australian property landscape, then be sure to check out our latest report. Australian real estate expert Catherine Cashmore reveals why she thinks we could see the biggest property boom of our lifetimes — over the next five years. Click here to learn more.
For The Daily Reckoning Australia