In spite of vast swathes of the country experiencing varying levels of lockdown, as well as many retail outlets closed, a very strong level of shopping centre transactions continued unabated in August. The upswing in the number of transactions, which commenced in April this year, has also seen a surge in both the value and volume of shopping centre transactions. The Data App estimate, in the three months to August, the number of transactions is over three-fold higher than a year ago, while the value of transactions, touching close to $1bn over the same period, is the highest since January 2018, thereby predating the pandemic.
As the Australian pandemic has progressed and consumer behavioural patterns have changed, so has the desire for shopping centre assets. Shopping centre demand continues to be dominated by a strong appetite for convenience, neighbourhood and large format outlets, as these are perceived to be relatively safe options, catering more for everyday needs. Consequently, yields for these assets continue to trade at historically low levels.
At the other end of the spectrum, sub-regional shopping centres are being off-loaded. As well as sub-regional centres being more adversely impacted by the lockdowns in the short term, their tenancy mix, remains exposed to the growing creep of on-line shopping. Consequently, yields for sub-regional centres have expended throughout the pandemic.
The net effect of this transactional mix has resulted in cap rates falling marginally over the past year.
Should the planned opening up of Australia materialise in the latter part of the year, footfall in the larger shopping centres is likely to return to more normal levels. However, the extent by which retailers have been permantely damaged by the pandemic and/or the shift to on-line shopping remains the big unknown. This uncertainly, at least in the short term is likely to weigh on the larger shopping centres outlet, particularly those dominated by fashion. At the other end of the risk spectrum, neighbourhood and large format centres are likely to remain in strong demand.
For more research undertaken by the http://PAR.Group/ on the impact of the pandemic and e-commerce on shopping centres refer to the links below:
http://par.group/working-from-home-is-not-a-free-lunch/
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