A big lift in property values and improving income from office markets in Melbourne and Sydney have delivered one of the country's largest diversified real estate investment trusts a substantial boost in profit.
GPT Group, which lists shopping centres, high-rise city offices and industrial estates in its property portfolio, said it earned $1.153 billion in net profit after tax for 2016.
The result delivered security holders a 5.6 per cent increase per unit to 29.88¢.
Chief executive Bob Johnston said a combination of rising rents and a $612 million revaluation contributed like-for-like income growth of 4.5 per cent across the property portfolio.
But the group said that, after two years of strong growth, speciality sales in its shopping centre portfolio were slowing – they increased by just 2.6 per cent.
Mr Johnston said the remixing of the retail portfolio has led to changes in focus, with 32 per cent of new tenants being food operators and about the same in new retail services, such as nail bars.
There has also been a change in the definitions with specialty stores such as Cotton On moving into the "mini major's category.
"There has been a lot of upheaval in retail tenants, but while it is said landlords charge high rents, our occupancy costs have declined over the past year, indicating that sales are rising to cover the rents," Mr Johnston said.
"We are focussed on remixing our malls to offer a wide range of services to cater for all visitors."
GPT's head of retail, asset management, Vanessa Orth, said specialty sales growth, as anticipated, has moderated while underlying specialty sales productivity continued to improve and was now above $11,000 per square metre.
"Branded jewellery retailers such as Pandora have recorded strong sales, whilst in general retail the cosmetics growth story continues, with retailers like Mecca and Mac outperforming," Ms Orth said.
"In regard to apparel, there are two major factors influencing the low moving annual turnover (MAT) growth. Firstly the move by apparel into large format stores, and secondly our active remixing away from lower productive apparel retailers."
The retail portfolio as a whole delivered like-for-like income growth of 3.8 per cent over the year.
The slowdown in speciality sales echoes a broader industry trend where top brands are struggling to survive cutthroat competition from fast-fashion international retailers setting up shop in Australia.
This year well-known brands Marcs, David Lawrence, Rhodes & Beckett and Herringbone have been placed in administration, with the latter two brands closing seven stores on Monday.
GPT said the value of its retail portfolio increased by $230.8 million last year.
Capitalisation rates firmed to 5.36 per cent across its centres, with standout performers being Melbourne Central (up 11.4 per cent), Highpoint (up 10.3 per cent) and GPT's ownership interest in its wholesale shopping centre fund (up 6.8 per cent).
The group boosted its holding in the wholesale shopping centre fund last year.
Across the property portfolio, occupancy was a high 97.1 per cent, Mr Johnston said.
The rosy outlook for office landlords would continue this year.
"Our key office markets of Sydney and Melbourne have experienced further improvements in property fundamentals and we expect both will deliver solid rental growth over the next few years, supported by positive tenant demand and a limited supply of new space over that time," Mr Johnson said.
"Market conditions are expected to remain positive for valuations of high-quality assets in prime locations through 2017."
GPT announced on Monday it would expand its presence in the booming Sydney western suburbs after buying a site on the corner of Smith and Phillip Streets in the heart of Parramatta's CBD for $31.2 million.
Across its office portfolio, the group signed 170,000 square metres of leases, including heads of agreement, over the year.
Logistics income grew 1.4 per cent over the year with occupancy up to 95.3 per cent, GPT said.
Several key assets in the development pipeline were also expected to come online.
The Eastern Creek and Seven Hills logistics facilities in Sydney, along with the recently-acquired Huntingwood site, will deliver 64,400 square metres of new facilities when completed.