Estimating the value of shopping centres: an attractive asset
Shopping centres are all about attracting customers. The main challenge is maintaining a flow of customers and differentiating from other centres. In order to meet these objectives, shopping centres tend to establish themselves in the city centre and develop premium services. These centres incorporate a mix shops, restaurants and cinemas to create a blend of shopping and entertainment.
This asset is intended for a market of occupiers and investors. More than one third of shopping centres are international. It is important to note that there is a downward trend in transactions due to a shortage of supply, particularly for large transactions.
1 148
AMOUNT INVESTED IN MILLION EUROS
+25,45%
EVOLUTION OF THE AMOUNT INVESTED COMPARED TO 2022
5%
PREMIUM RATE OF RETURN
S2 2023 - Research - BNP Paribas Real Estate
Shopping Centre Valuations: Our expert weighs in
Christian lardy
Expert valuer specialised in shopping centres and retail parks
What are some of the specificities of a shopping centre asset?
The shopping centre asset derives its value from its ability to generate customer traffic. In order to develop its attractiveness in the eyes of consumers, it combines an entertainment offer (restaurants, cinemas, etc.) with retail. The quality of these diverse services is the key to making the shopping centre an attractive asset. As such, these services are intrinsically tied to its value (digitalisation, concierge, parking, etc.).
The presence of major national and/or international brands also helps attract customers: FNAC, for example, or large clothing and accessory franchises, play a role as consumer magnets. It is also crucial to ensure that vacancy rates are kept to a minimum.
To meet these objectives, the trend is towards establishing shopping centres in the city centre and developing premium services.
What are investors' expectations of this asset ?
Investors expect a high occupancy rate. They are also attentive to the quality of signatures (national and international brands). Two other indicators must also be considered: the turnover/m² and the effort rate. The effort rate corresponds to the ratio of rent to expenses/sales. It varies significantly from one sector of activity to another. The sustainability of the business is generally considered to be compromised if it exceeds 15% over the long term. Shopping centres have the highest of effort rates.
What are the main criteria for valuing a shopping centre?
Location is an essential aspect of shopping centre valuation. The quality and diversity of the services offered by the shopping centre (digitalisation, concierge services, parking facilities) also have an increasingly strong impact on its value added, particularly when they allow customers to enjoy an enriched shopping experience.
Geographical location
Downtown area, easy access by public or private transport
Asset size
Hyper regional, local shopping mall, etc.
Services offered
Digital services, concierge, parking, etc.
National/international signage rates.
The more famous they are, the more traffic they generate
Study of the main indicators
Turnover/m², rent/sqm, effort rate
The methods used to value the shopping centre asset are mainly: Discounted Cash Flow (DCF) and capitalisation, taking into account the differences between recorded rents and calculated market rental values (MRVs) and applying an analysis adapted to vacant premises; the determination of portfolio premiums; the sensitivity study (return rate, discount rate, occupancy rate, etc.).
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