It continues to be the case very few shopping centres are changing hands. The Data App estimates the number of shopping centre transactions is the three months to August is over 60% lower than a year earlier. Consequently, both the volume (sqm) and value of shopping centre transactions are well down on a year earlier. The dearth of transactions makes the accuracy of cap rates particularly difficult, especially since these have been dominated by the non-discretionary, supermarket dominated, small retail assets.
The number of shopping centres changing hands continues to dwindle. According to The Data App estimates, in the three months to July, the number of shopping centres transacted was less than half that recorded the same time last year. Needless to say, the volume (sqm) and value were also well down on a year earlier. The continuing dearth of transactions makes the accuracy of cap rates difficult, especially since the bulk of recent activity have been for smaller, lower yielding, retail outlets.
The number of shopping centre transactions remains at a low ebb. In the first six months of this year, less than half the number of shopping centres changed hands compared to the same period a year earlier. Consequently, the volume (sqm) and value were also well down on a year earlier. The sparseness of transactions makes the current accuracy of cap rates more problematical. Even so, it seems reasonable to conclude, overall cap rates have increased by a shade under 200 basis points from their cyclical low. Continuing the trend, cap rates for smaller, everyday needs shopping centres, while having increased, remain well below those for larger destination shopping centres.
The number of shopping centre transactions continued to flounder in the three months to May, while the volume (sqm) and value of transactions, while stronger, have been boosted by some large assets changing hands. The low number of transactions is against a backdrop of cap rates now above 7%; up over 200 basis points on a year earlier. However, not all asset types have performed the same, with higher cap rates continuing to be associated with bigger, destination type, shopping centres.
After dipping down, property prices now appear to have stabilised and, along with rising mortgage rates, cost-of-living pressures and a surge in migration, housing affordability has again become a key issue. Nowhere more so than Sydney, continually recognised as one of the most unaffordable cities in the world.
Housing affordability is not a recent issue, from the beginning of the twentieth century, up until the end of 1986, roughly six months of annual personal income was the benchmark for a 10% housing deposit. This figure is currently around 16 months. So, despite a decline in property prices, entering the Sydney housing market has, through time, become increasingly onerous.
Shopping centre transactions, which had started to gather some modest upwards momentum since the start of the year, virtually dried up as the Silicon Valley Bank and Credit Suisse both collapsed. Consequently, both the number and volume (sqm) of shopping centre transactions was lower in the first quarter of this year compared to a year earlier. Shopping centre cap rates have continued to edge higher across the whole spectrum of asset types, reaching their highest level since May 2016 according to The Data App estimates.
Whilst the number of shopping centres changing hands has started to edge higher, they remain down for the three months to February compared to a year earlier, according to The Data App estimates. As in recent months, the volume (sqm) and value of transactions are also lower than a year ago. Clearly, part of the reason for the improvement in transactions is the increase in cap rates, which are close to 150 basis points higher than a year earlier.
Sub regional shopping centres across Australia worth over $800 million failed to transact in 2023, highlighting the challenge determining the value of retail property assets amidst a challenging economic backdrop of high inflation, slowing retail spending, rising interest rates and an increasing cost of capital.
In the middle of last year shopping centre cap rates were averaging close to 5%, according to The Data App estimates. However, in the three months to January, cap rates were on the verge of 7%; an increase of close to 200 basis points. In spite of this pick-up in cap rates, the number of shopping centre transactions are around half those posted a year earlier. In value and volume (sqm) terms, the decline in shopping centres changing hands has been even more dramatic.