Mall Owner Recovers as Leases Surge

Retail Rebound: Shopping Centre Owner Boosts Outlook Amidst Post-Collapse Recovery

Australia’s retail landscape is showing signs of resilience, with a prominent shopping centre owner, Region Group, upgrading its financial guidance. This positive shift comes as the group’s diverse portfolio gradually recovers from the significant impact of the collapse of Mosaic Brands, a major operator of women’s fashion retailers including Noni B, Rivers, and Katies.

Region Group, which boasts ownership of 87 neighbourhood and sub-regional shopping centres dotted across Australia, has been diligently working to fill the retail spaces left vacant by Mosaic Brands’ extensive store closures, which occurred in late 2024 and early 2025. While the process is ongoing, the company reports substantial progress.

“We’ve got about 85 per cent either leased or casually let, where it’s earning some sort of income,” stated David Salmon, the Chief Financial Officer, during a recent conference call with analysts. He elaborated that while the ultimate goal is to achieve full occupancy, the remaining vacancies are currently exerting a slight downward pressure on the Net Operating Income (NOI).

The company’s latest figures, as of December 31, indicate a portfolio occupancy rate of 97.7 per cent, a marginal but positive increase from the 97.5 per cent recorded in June 2025. More encouragingly, when excluding the anchor tenants – primarily major supermarket chains like Coles and Woolworths – the vacancy rate for smaller tenancies has fallen to 4.5 per cent. This represents a notable improvement from the 5.4 per cent vacancy rate observed just six months prior.

To secure new tenants for these remaining spaces, Region Group has acknowledged the necessity of offering enhanced leasing incentives. However, a key point of optimism highlighted by the company is its confidence in the financial stability of its current tenant base, a stark contrast to concerns that may have arisen in previous years.

Tenant Confidence and Sector Strength

Anthony Mellowes, the outgoing CEO who is set to retire in March after a 14-year tenure, expressed strong confidence in the performance of several key tenants. He specifically pointed to The Reject Shop, which is now under new ownership by a substantial Canadian discount retailer. “They’re doing a tremendous job, they want to expand, so they’re looking really positive,” Mellowes remarked, alluding to the Canadian company Dollarama.

Chemist Warehouse was also cited as a tenant performing exceptionally well. Mellowes emphasised that the group is not currently facing significant concerns about the financial health of any particular tenant. “So we don’t have any portfolio of tenants that we’re sitting there going ‘we’ve got a big watch on them’, like we had in the past,” he asserted. While acknowledging that some tenant turnover is a natural part of the retail cycle, he stressed that there are no immediate red flags concerning the “mini-majors” within their centres.

Furthermore, Mellowes indicated that he does not anticipate a recent increase in interest rates to significantly impact retail sales for their tenants. This optimism is rooted in Region Group’s strategic focus on the non-discretionary retail sector, which tends to be more resilient to economic fluctuations.

Financial Performance and Market Reaction

Region Group’s financial results for the half-year ending December 31 have underscored the company’s positive trajectory. The group reported a statutory net profit of $180 million, a substantial 120 per cent increase compared to the same period last year. It’s important to note that a significant portion of this profit surge is attributable to an increase in the fair value of the group’s investment properties.

Beyond statutory profit, the Adjusted Funds from Operations (AFFO), a crucial metric for evaluating the performance of property investment groups, saw a healthy rise of 3.0 per cent, reaching 6.9 cents per security.

In light of these positive developments, Region Group has revised its full-year earnings guidance upwards to 14.1 cents per security, an increase from the previously forecast 14 cents.

The market has responded favourably to the company’s upgraded outlook and strong financial performance. By lunchtime, Region Group’s stapled securities had climbed 3.5 per cent, reaching a three-week high of $2.40. This upward movement reflects investor confidence in the company’s strategic direction and its ability to navigate the evolving retail environment. The recovery in occupancy and the strength of its tenant base are key indicators of Region Group’s ongoing success in revitalising its shopping centre assets.