Cap Rates Trending Up, Transactions Continue to Moderate

Shopping centre transactions continue to moderate. This follows the 2021 boom, and the move to safer smaller retail assets, backed by the big supermarket chains and large format centres, underpinned by the likes of Bunnings. As well as this, last year witnessed a number of non-core sub-regional shopping centres being offloaded. The Data App estimate, in the three months August, the number, volume and value of shopping centres continued to be significantly down on a year earlier. Even though transactions remain dominated by smaller shopping centres outlets, cap rates, after dipping below 5% in June, continue to move higher.  

The transformation in shopping centre transactions this year is captured in the moderation of the relative volume and value. In the three months to August this year, the average size of a shopping centre transaction, by square metre, is close to half the size as the same period a year earlier. By the same token, the average value of each shopping centre transacted is down by a similar extent. In a nutshell, the sale of large, higher valued shopping centres has slowed to a trickle, especially compared to last year.

In 2021, there was over $13bn in shopping centre transactions. With less than $6n of this being completed in the first eight month of last year, the last four months witnessed a deluge of activity; particularly regional and sub-regional assets.

For 2022 as a whole, while the number of transactions is likely to be well down on 2021, the volume and value of transactions will, almost certainly, be less than half of last year. Furthermore, this year’s moderation in shopping centre activity started to unfold well before interest rates started trundling higher.

While the current cap rate is bloated by one transaction outlier, against a backdrop of rising borrowing costs and a meagre implied risk premium, it seems cap rates will continue their upwards trajectory. Earlier work, carried out under the Par Group umbrella, suggested cap rates could quickly move above 6%. Adding to the upwards pressure on cap rates is the current abundance of retail assets being offered for sale. Further compounded by a constrained consumer budget, going forward, a continuation of moderate transactions and rising cap rates looks likely.


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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.