In contrast to offices, there is less evidence of a ‘flight to quality’ in the overall retail sector. Shopping centres are the exception, where the spread between both prime and non-prime yields, and floorspace and financial vacancy rates has widened in recent years. That is also reflected in rents, where prime shopping centre rental growth recently reached a 15-year high. We think that divergence will persist so while overall shopping centre rental growth will underperform the overall retail sector, newer centres with higher quality facilities and a broader mix of tenants will do better.
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