After a strong conclusion to 2021, Citycon continued to demonstrate the strength of our strategy and portfolio during the first quarter of 2022. Like-for-like net rental income increased 3.5% over the prior year. The average rent per square meter increased 0.8 EUR to 23.4 EUR/s.qm., while retail occupancy moved up to 95.1%. We continue to see very strong growth in both footfall and tenant sales, which increased dramatically compared to the previous year. Notably, tenant sales are already above pre-pandemic (2019) levels highlighting the speed of the recovery of Citycon´s grocery- and municipal-anchored centres.
The strong operational figures reflect the stability of our necessity-based centres which serve as a last mile logistics hub for delivery of grocery, municipal, and other services directly to the consumer. With customers prioritizing convenience and accessibility, more and more tenants are leveraging their omnichannel strategies and utilizing their physical stores as the critical last-mile distribution. Our excellent urban locations in the strongest and fast-growing cities in the Nordics, and the fact that all our urban hubs have a direct connection to public transportation, offer attractive opportunities for tenants and irreplaceable convenience for customers. Tenant demand for our centres has accelerated as evidenced by our strong leasing activity with over 48,000 sq.m. of signed leases during the first quarter, resulting in increased retail occupancy of 90 bps to 95.1%, coupled with rent growth.
Our strategy of creating mixed-use urban hubs with a focus on grocery and municipal services is paying operational dividends and driving traffic to our centers, highlighted by significant like-for-like growth in both footfall (17%) and tenant sales (12%) in the first quarter. Notably, like-for-like tenant sales are already above pre-pandemic (2019) levels, on the strength of spending in groceries, pharmacies, municipal and healthcare services. Like-for-like net rental income increased by 3.5% compared to Q1/2021 and our average rent level increased by EUR 0.8 per sq.m. to EUR 23.4 compared to year-end 2021. These operational improvements continue to positively impact asset values as our operating properties recorded a fifth consecutive quarter of uplift as total fair value change of investment properties in Q1/2022 was EUR 24.6 million and net fair value change was EUR 14.2 million. EPRA NRV per share has increased by +5.7% compared Q1/2021.
As disclosed in February 2022, we divested two additional non-core assets in Norway during the first quarter with pricing above NAV. This means we have now sold 6 non-core assets over the last 14 months at pricing that validates our increasing valuations. We entered into a forward funding agreement to purchase a brand-new residential asset comprising of 200 apartments in Stockholm near our Kista and Jacobsberg centres. During, and subsequent to, the quarter we continued to demonstrate our strategic capital allocation to strengthen the balance sheet, as part of the divestment proceeds were used to repurchase approx. EUR 25 million of our bonds maturing in October 2024. The repurchase is accretive to earnings, strengthens our maturity profile and reduces refinancing risk as we have no near-term maturities until 2024.
The absolute highlight of the quarter was the grand opening of phase one of Lippulaiva, our new mixed-use centre that represents the future of convenient urban living. Lippulaiva is the prototype of Citycon’s strategy: a full-service, mixed-use, urban hub with several large grocery anchors, a wide range of private and municipal services, direct connection to the metro, surrounded by eight residential towers. The metro construction is complete, and it will begin to operate by the year-end. Six of the eight residential towers are under construction with first ones opening up later this year. Lippulaiva is the ultimate in convenience, experience and atmosphere for consumers and it will have an immediate impact on the community and consumers that surround it. Notably, grocery stores account for approximately 45% of the centre and all necessity goods representing over 70% of Lippulaiva’s 44,000 sq.m. of gross leasable area. Lippulaiva is expected to welcome approximately 8 million annual visitors.
Lippulaiva is also the prototype of Citycon´s sustainability initiatives in action. The centre is a pioneer in sustainable energy solutions and is carbon neutral in terms of energy consumption from day one. The primary source of energy is the largest ever geothermal heating and cooling system built on a commercial building in Europe combined with integrated solar panels and a smart electricity management solution.
Finally, Lippulaiva is also an important milestone in realising the potential in Citycon’s robust development pipeline and marks the first time that Citycon has carried out its own rental housing production. The residential component of the project consists of 560 apartments, which will come online between late 2022 and 2024, further diversifying Citycon´s portfolio and revenue streams while enhancing the underlying performance of the retail centre.
As our results show, Citycon is well positioned for the anticipated inflationary environment. Our business model is inflation protected with 92% of our leases indexed to inflation and the types of goods and services that our centres sell are less dependent on discretionary income than traditional retail. Although, Citycon’s operations are not directly impacted by the war in Ukraine, there is the spill over effect of increasing energy costs. Citycon has a significant amount of onsite energy production, and the vast majority of our electricity costs are hedged, which provides further stability both for Citycon and its tenants going forward. Citycon´s relatively low occupancy cost ratio also offers the company ample headroom for rent growth particularly as sales continue to increase. This continues to translate into strong leasing activity and stable cash flow. This stable cash flow, combined with the significant value creation potential for our development pipeline and an investment grade balance sheet, provides an attractive risk-adjusted return proposition for all stakeholders.
As a result of the strong quarter and the confidence we have in the business, we are tightening our guidance and raising the mid-point on all three metrics for which we provide guidance.
Source: Citycon's Interim Report Q1/2022