The long-anticipated expansion of Galleria Shopping Centre in Morley has been deferred, just days after receiving final planning approval, though its co-owner has committed to a $63 million expansion of Ellenbrook Central.
The long-anticipated expansion of Galleria Shopping Centre in Morley has been deferred indefinitely, just days after receiving final planning approval, though its co-owner has committed to a $63 million expansion of Ellenbrook Central.
Vicinity Centres also announced today, as part of its interim results package, that it has written-down the value of nearly all its Western Australian properties because of the weak retail market.
The notable exception was its recently opened DFO Perth near the airport, which it said had significantly exceeded expectations.
Vicinity and co-owner Perron Group have been working on the Galleria expansion for at least five years.
Their latest plans were approved on Monday by the Metro Central development assessment panel.
Under these plans, the centre would have more than doubled in size, with a phase one expansion lifting the gross lettable area from 81,000 square metres currently to 180,000sqm, and a phase two expansion taking it to 263,500sqm.
The plans also included a cinema complex, and multi-storey office and apartment buildings.
The deferral was disclosed in a one-liner in Vicinity's interim results presentation.
In response to questions from Business News, a spokesperson for Sydney-based Vicinity Centres said the decision reflected market conditions.
“Due to current market conditions, we have determined that now is not the right time to begin a major development in metropolitan Perth,” she stated.
“We will revisit the major redevelopment project when the WA retail leasing environment returns to strength.”
Perth-based Perron Group declined to comment.
Vicinity has also cut its valuation of Galleria and nine other shopping centres it owns in WA.
Galleria’s value has been trimmed by $20.5 million to $365 million.
Other WA centres to be written-down in value include Mandurah Forum and Warwick Grove.
“The subdued sales environment in WA is affecting all retail assets in WA, and as a result we are also experiencing flat or declining sales growth,” the spokesperson said.
“This is impacting income in valuations and also ‘cap’ rates for WA assets given softening demand for retail assets in this state (as evidenced by our recent sales in that market).”
Deferral of the Galleria project comes after major upgrades of several other centres across Perth, including Westfield Carousel, Mandurah Forum, Westfield Whitford City and Midland Gate.
AMP has also been evaluating a proposed expansion of Garden City Booragoon but is yet to make a final decision.
The news from Vicinity was not all negative,
It has announced a $63 million development at Ellenbrook Central, which it said was situated in one of the strongest growth corridors in WA.
The centre will expand from 36,600sqm to about 48,600sqm, with the addition of a new Kmart store, three ‘mini majors’, 16 new specialty retailers and additional car parking.
Vicinity is working through a number of pre-conditions for the development, which is expected to commence mid to late 2019.
The group also announced DFO Perth, which opened in October with 113 retailers, has achieved a strong sales performance, particularly from premium retailers.
Vicinity said the project has delivered a development yield of greater than 12 per cent and an internal rate of return of 17 per cent.
This has underpinned a 40 per cent revaluation of the asset, with Vicinity’s 50 per cent stake now worth $106 million.