Cap Rates Keep Ratcheting Higher

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 increase in cap rates over the past year has been abrupt, the number of transactions remains below its long run trend. Whilst the slow market, in part, probably reflects the change in funding conditions, the number of shopping centre assets currently sitting on the market, points to a continuing discrepancy between the bit and offer spread. Indeed, while the implied shopping centre implied risk premium has increased over the past year, it remains close to 50 basis points below its long-run average. Should shopping centre risk premium revert back to its long-run risk premium then there is still further upside to cap rates.

With respect to the recent banking crisis, involving Silicon Valley Bank and Credit Suisse, it is unlikely their collapse is disinflationary. If so, there is every chance global inflation will be higher for longer following the pumping of liquidity into the system by central banks around the world, all of which is occurring against a backdrop where interest rates are expected to at a lower level than envisaged prior to the recent crisis. This creates a predicament for central banks as tighter monetary policy will be required to supress any inflationary pressures which brings with it the risk of additional financial woes and tighter lending criteria for potential borrowers.



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.