Chopping shopping? Implications of retail structural change on sector allocations (December 2019) Summary Report

Retail real estate has traditionally been seen as an attractive investment class. Historically it has provided superior returns, long-term stability and income growth. It has preserved residual value, allowed for diversification and enhanced the scope to deploy substantial capital in a single transaction. With the emergence of e-Commerce and the slow recovery from the Global Financial Crisis, some of these attributes for the key international markets are becoming more difficult to replicate through investments in retail. This research analyses trends in the retail market and in retail real estate investment performance to identify implications of e-Commerce for property investment allocations within the retail sector for the UK, the US, Germany, France, Spain and Australia. Projections regarding future e-Commerce, requirement for retail space and total value of retail assets are based on ARIMA models using national MSCI and Euromonitor statistics. They provide high-level estimations of value of real estate investments to be retained in the retail sector indicating dramatic reduction of allocation to retail in such countries as the UK and the US. Given the projected negative growth in retail investment, we provide directions as to whether other property sectors could be an alternative to retail and to what extent they give opportunities to replicate the attributes of traditional retail investments