Seasonal Pause or the Start of a Softer Market

Whilst shopping centre transactions were higher than a year earlier in the three months to February, activity, however measured, has moderated. The Data App estimate, the number, value and volume (GLA) of transactions, in the three months to February, have all eased back from the record highs posted over the previous three months. Clearly, some of this moderation is seasonal, as the overall picture remains one of robust demand for shopping centres..

There are numerous reasons for the surge in shopping centre transactions through 2021. On the one hand, with restricted physical movement, compounding and contributing to, a structural increase in on-line shopping, the demand for, apparently safer, essential needs shopping destinations increased sharply. For similar reasons, as well as the need to diversify or reduce risk, larger shopping centre outlets were offload. Transactions of shopping centre assets was further supported by attractive yields, particularly when compared to other commercial asset classes. This was against a backdrop of easy credit conditions and ample liquidity.

As the pandemic-imposed restraints continue to ease or disappear, physical shopping conditions will clearly improve, although the structural shift to on-line shopping is unlikely to go into reverse. Furthermore, even if workers are encouraged to return to centalised office locations, flexible home working arrangements, in some manifestation, seem here to stay. Whilst clouded by geo-political risk, which is adding an extra layer of uncertainty, interest rates are edging higher, while credit conditions have tightened, if only slightly.

As for the retail spending fundamentals, real incomes growth remains weak. Offsetting this, the personal sector saving ratio is high compared to recent history. However, spending power could be crimped by higher mortgage payments and if the preference of consumers is to save / reduce debt, rather than spend.

With some shopping centre portfolios now rebalanced and credit conditions marginally less relaxed, transactions are likely to return to more normal levels, with the reference towards convenience, every day needs centres continuing to dominate.

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


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