Clothing or shelter? Shopping Mall Investors Face Mortgage Dilemma

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In contrast, all Mirvac malls are located in areas with less than 2% late payment, although this is in part due to the fact that many of its malls are located in areas dominated by tenants living in high-density apartments.

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Mortgage debt at Stockland’s Wetherill Park in western Sydney is more than three percent, which is about 11 percent of its retail portfolio.

Morgan Stanley analysts said the study has caveats: Large malls tend to attract customers from a wider region rather than one zip code, and not all households are mortgage tenants.

But over the next six months, they said, shopping malls’ performance could depend on geographic location and which assets are most at risk of recovering from COVID.

“In addition, as multichannel buying continues to grow, borders reopen and retailers redefine their stores and rental costs, malls may continue to face challenges, so any advantage (such as lower mortgage debt), however small, should not sneeze, “they said.

Analysts gave Mirvac, Scentre and Stockland the highest scores, with Vicinity “possibly causing concern.”

Large landlords in Australia also have to deal with differences in yields in different types of centers.

Another study by Damian Stone of Y Research and Rob Ellis of the Data app, under the heading of PAR Group Research, shows that returns – which increase as the risk associated with a particular asset increases – for sub-regional centers rose to 7.5 per cent.

Conversely, yields for neighborhoods (6%) and large-format centers (5.5%) have dropped significantly over the past year, they said.

“Large format shopping malls have evolved into an institutional asset class, with returns falling from nearly 12 percent in 2012/13 … to less than 6 percent, which is historically more in line with regional shopping center returns,” they said.

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