The Great Retail Yield Divide

The uncertain role of sub regional centres in the evolving Australian retail marketplace, post the COVID 19 pandemic, is highlighted by emerging yield spreads across retail assets according to a new study by the PAR Group.

Surge in Shopping Centre Transactions

Commercial retail property transactions in the month of April were the highest since October 2018, as some larger shopping centres were offloaded, while the demand for neighbourhood and large format centres remained solid. As a consequence, the latest figures from The Data App, show the number of transactions in the three months to April were up over 60% compared to a year earlier, while the value of transactions, at over $0.5 billion, is more than double for the same period a year ago.

Cap Rates Continue to Decline in Subdued Commercial Retail Market

A year ago, as the first wave of the pandemic hit, Australia embarked on a lockdown which was to last until the middle of May. Additionally, many states and territories have closed their borders at varying times, while there has been extended periods of social distancing. Although some essential retail spending benefitted from panic buying other, non-essential spending in shops was crimped by a combination of temporary/permanent shop closures and a sharp uptake in on-line spending.
With uncertainty surrounding the length, duration and impact of the pandemic, shopping centre transactions started to taper away, reaching a low around the middle of 2020.

Commercial Retail Transactions Picking Up

Following a lull in trading activity during January, shopping centre transactions strengthened during February. Whilst the number, as well as the square metres, of shopping centres changing hands in the three months to February is lower than the same time last year, it is considerably stronger than the lows posted during 2020.

Some Retail Assets Continue to Transact

Investment activity for Australian commercial retail property was modest in January, and follows the spike in the number of transactions towards the end of last year. Whilst there is a high degree of volatility, and transactions are well down on a year earlier, they are, nevertheless, close to their long run trend.

Value Investors Go Shopping

After dwindling through the course of 2020, investment activity in Australia’s commercial retail property market picked in November and December, according to the latest findings from The Data App. Even though the number of transactions, on three-month average, remains well down on a year ago, December posted a marked upturn. Consequently, transactions are currently close to their long-run average.

Activity Moderates Again

After rebounding strongly in July and August, TDA’s Monthly Activity Indicator (MAI) was virtually flat in September and declined by a modest 0.2% in October; no doubt impacted by the residual effect of the Victorian lockdown. As a result, the annual rate of growth moderated slightly to be below its ten-year average.

Shopping Centre Transactions Improve

Investment activity in Australia’s commercial retail market picked up during November. While the three-month average is well down on a year ago, the month of November recorded the highest number shopping centre transactions for the year. Transactions were dominated by large format and convenience-based stores.