Commercial retail cap rates reach three year highs: The Data App
After dipping down in May, The Data App estimate trend cap rates rose to 6.66% in June; an increase of 13 basis points on last month. and 62 basis points higher than a year earlier, according to Rob Ellis, Director of The Data App (TDA).
Mr Ellis said, "this means cap rates, in trend terms, have risen to their highest level since June 2016.”
“From their low point in March 2018, The Data App calculate trend cap rates for commercial retail assets have now increased by 96 basis points.”
“While retail assets continue to be brought to the market, there is little doubt demand is becoming more subdued," he noted.
Trend estimates for June show:
- The value of shopping centre transactions was the lowest since April 2017 and;
- The volume of gross lettable area (GLA) transacted during the month was the lowest since April 2012; over seven years ago.
TDA conservatively estimates around 1.3 million square metres of gross lettable area (GLA) is currently up for sale.
Mr Ellis said, "current trend cap rates (6.66%) are still well below their long-run average (7.42%). Simple mean reversion would point to some further upside, while cyclically weak consumer demand, the impact of internet shopping as well as a number of AREITs being net sellers of shopping centres, would suggest scope for even higher cap rates.”
"Pulling in the opposite direction, commercial retail property is offering increasingly attractive yields, especially when compared to other asset classes. This value attraction will eventually encourage buyers back. For now, the balance of risks to shopping centre values remains skewed to the downside,” he concluded.
