Shopping centre transactions continued to boom in the three months to July, thereby maintaining the strength witnessed last month. Consequently, transactions are significantly higher than a year earlier, when Covid-19 had taken hold and activity was stalling. The latest estimates from The Data App show the average number of transactions in the three months to the end of July remained over twice as high as a year ago. Similarly, the value and volume of shopping centres changing hands also remains strong, with both measures, in the three months to July, up over three-fold on a year earlier.
Even so, the headline numbers disguise a slowing in transaction activity during July, as the lockdown in NSW became extended, while some of the other states imposed temporary restrictions on people movements. With reduced opportunities for potential investors to inspect shopping centres and greater uncertainty of their, Covid impacted, long-term value, it seems likely there will be a moderation in transaction numbers.
In recent months shopping centre transactions have been dominated by the high demand for convenience, neighbourhood and large format centres. Not only this, given their greater resilience to the impact of covid-19 / ecommerce, the cap rate for these assets has continued to tumble. This helps to account for the overall decline in cap rates, while cap rates for large shopping centres has steadily trended higher.
With the more virulent delta covid variant becoming increasingly widespread in NSW and with no planned end to the lockdown, large shopping centres will continue to see their customer base transition to on-line shopping. Already, the impact and uncertainty of Covid-19 has resulted in GPT pulling its earnings guidance. At the other end of the risk spectrum, neighbourhood and large format centres are likely to remain in strong demand.
For 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:
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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.