Transactions strong, but with signs of a moderation

Reflecting the usual seasonal lull at the start of the year, shopping centre transactions came off their record highs posted at the end of 2021. The Data App estimate, despite a relatively high number of transactions in January alone, in the three months to January the number of transactions was very little changed from a year earlier. Similarly, the volume and value of transactions came off their all-time high but, nonetheless are well up on this time last year. So, despite a seasonal easing, the overall picture is one where the demand for shopping centres remains robust.

Reflecting the strong demand for shopping centres through the course of 2021, with the appetite for neighbourhood and large format outlets particularly robust, cap rates declined sharply. At the start of 2021, cap rates, on a trend basis, were 6.38%. By year-end they had declined to 5.43%; a fall of close to 100 basis points. However, whether due to, a nudging up in real interest rates, a slight tightening in credit conditions or simply a change in the composition of assets being transacted, cap rates have started to edge higher. Whilst this may not herald a turning point, it bucks a trend which has been apparent for the past year.

With some retail spending irretrievably lost to on-line shopping, a longer-term revival in bricks and mortar spending, in part, rests on strong consumer spending. There is no doubt, with Government subsidies and an historically high level of the saving ratio, the consumer fundamentals are strong. However, with interest rates, more pertinently mortgage rate heading higher, as well as the continuing uncertainty surrounding the Corona virus, there is always the possibility the consumer preference is for repaying debt, as opposed to additional spending. Should this scenario come to pass and, at this stage, there is no knowing whether it will or not, the main focus of shopping centre demand will remain on neighbourhood and convenience shopping outlets.

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:

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.