Shopping centre transactions reached a multi-year high in the three months to June, having slumped when the corona virus took hold around eighteen months ago. As the quarter drew to a close, with the corona virus apparently more under control and the vaccine rollout progressing, shopping centre transactions continued to strengthen. The latest estimates from The Data App show the average number of transactions in the three months to the end of June nearly three times higher than a year earlier.
This strength in the number of transactions is also reflected in the value and volume of shopping centre changing hands. The value of transactions in the three months to June is at its highest since the final quarter of 2018, while the volume of square metres transacted is at its highest level since the final quarter of 2019.
The buoyancy of shopping centre transactions reflects, on the one hand, the desire to off-load large shopping centres while, on the other hand, there remains a strong appetite for convenience, neighbourhood and large format centres. This has resulted in the cap rates for large shopping centres expanding while, the less risky centres, featuring supermarkets and a small number of speciality stores, have witnessed cap rate contraction. The net impact of this being little change in shopping centre cap rates as a whole.
With a more widespread outbreak of the corona virus occurring towards the end of June, large shopping centres will again be vulnerable to on-line shopping gnawing away at their customer base, bringing with it, uncertainty over their role and composition. Given the experience of the past year or so, already plans are emerging to redefine and diversify large shopping centres; Chadstone with offices and Harbourside with apartments; a trend that seems likely to continue. Against this, neighbourhood, along with large format centres remain more beneficially placed.
For more research, carried out by the PAR.Group, on the impact of the pandemic and e-commerce on shopping centres refer to the links below:
http://par.group/the-great-retail-yield-divide/
http://par.group/small-business-the-backbone-of-australias-major-regional-shopping-centres/
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: http://par.group/ for more information.