Retail shopping centre yields dip

Investors in shopping centre retail property endured their first decline in yields on their investment for the first time in a decade in the March 2008 quarter, according to a new report.

Statistics released by Jones Lang LaSalle yesterday show that yields received by investors in shopping centre retail property across the nation dipped by between 25 and 50 basis points in the first three months of 2008.

Investors in regional shopping centres experienced the biggest range in yields and the lowest average yield, while bulky goods shopping centres provided investors with the highest and most steady returns.

Jones Lang La Salle national retail analyst Dino Siswadi says rising interest rates and the global credit squeeze are behind the dip in yields.

“The data reveals a divergence in occupier and investor sentiment,” Siswadi says. “On the one hand we have low vacancy and robust rental growth, while in the investor market the increased borrowing costs and reduced access to debt has caused yields to soften in the quarter.”

Vacancy levels in shopping centres continue to be low, particularly in regional and sub-regional shopping centres where the mean national vacancy rate is 0.5% and 1.6% respectively.

Rents are also up across the board, but were stronger for regional and sub-regional centres than elsewhere, with rental growth of 4.9% and 5.1% respectively for the year to March 2008.