This article is from the Australian Property Journal archive
CONVENIENCE, neighbourhood and large format centres have continued their dominance as rolling quarterly retail transaction volumes showed a 230% year-on-year increase – however, a slowdown may have already begun.
The latest figures from The Data App shows $854.2 million in shopping centre deals recorded over the three months the end of July, clear above the $258.9 million recorded last year when COVID had taken hold.
The number of transactions per month increase from 5.7 to 14.3.
Prices per sqm paid were down only slightly to $5,409, while cap rates are 22 basis points tighter compared to one year earlier, down at 5.88%. Implied risk premiums firmed four basis points to 5.67%.
Director of The Data App, Rob Ellis, said 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, coronavirus impacted, long-term value, it seems likely there will be a moderation in transactions.”
“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/e-commerce, the cap rate for these assets has continued to tumble.”
Among those was IOOF making its first property acquisition in the well-performing sector, paying $68 million for the brand new Great Western Centre in Sydney’s Minchinbury.
“This helps to account for the overall decline in cap rates, while cap rates for large shopping centres have continued to trend higher.”
“With the more virulent delta COVID-19 variant becoming increasingly widespread in NSW and with no planned end to the lockdown, large shopping centres will continue to see parts of their customer base transition to on-line shopping.”
The impact and uncertainty of COVID-19 has already resulted in GPT pulling it earnings guidance as restrictions in the Sydney and Melbourne markets sapped visitation, and CBD centres suffer from lower office occupancy rates.
“At the other end of the risk spectrum, neighbourhood and large format centres are likely to remain in strong demand,” Ellis said.
