Cap Rate Jump Underpins Shopping Centre Transactions

Even though the final month of the year witnessed a flurry of shopping centre transactions, they remain well down on December 2021. Consequently, according to The Data App estimates, the number of shopping centre transactions in the three months to December is more than half the number posted a year earlier. Like December last year, transactions are domination by sub-regional centres changing hands although, this time around, cap rates are significantly higher; a feature which seems likely to persist.

The jump in shopping centre transactions in December has been achieved with the aid of a clear ratcheting up in cap rates. Notwithstanding some variation, cap rates have hovered around the 6% level for the past few months. But, in December alone, dominated by sub-regional shopping centre transactions, cap rates averaged 7.59%. As a consequence, for the final quarter of 2022, cap rates averaged 6.3%, up from 5.65% in the September quarter and a cyclical low of 5.33% in the June quarter.

The uninspiring outlook for retail spending, which generally envisaged for 2023, is well documented. However, even if this is not the case, there is a strong case for expecting cap rates to remain around 7%.

In the December quarter of 2022, the implied compensation for investment risk for investing in shopping centres was 4.68%, which is over 70 basis points lower than a year earlier. Simply accepting a similar compensation for risk now, as this time last year, would imply cap rates above 7%.

Clearly, since not all assets are equal and on-line shopping has made inroads into spending behaviour, cap rates are unlikely to be uniform, with lower cap rates likely for essential spending shopping centres than say for inner city ones, which continue to grapple with changes to working patterns.

As for the year as a whole, which will be dealt with more extensively in another piece, transactions, by any measure, are well down on the boom in 2021. While the number of transactions is down 36% between the years, the amount of space (sqm) is down significantly more, reflecting the move towards more smaller shopping centres changing hands. This is similarly reflected in the value of transaction, which has declined by a similar magnitude.

For further information or additional data, contact


Further research undertaken by the http://PAR.Group/ on the impact of the pandemic and e-commerce on shopping centres refer to the links below:


About PAR Group

The Data App (TDA) is a member of the PAR Group, an independent research collective offering a comprehensive range of property research and analytical services. The team is experienced in economics, property research, transactional and corporate strategy; all with extensive industry involvement in both the property and finance sectors. Visit: for more information.