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The View | Asian retail property going strong despite pandemic-driven e-commerce boom
- While Covid-19 has driven sharper price corrections in UK and US retail real estate, boosting rental yield, it has also accentuated the resilience of Asian retail property
- Asian retailers have been more successful in future-proofing their assets and operations, putting them on a more secure footing than their Western peers
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In commercial real estate, some sectors have had a good pandemic while others have been hit hard. The retail sector is firmly in the latter camp.
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Even before the pandemic struck, retail properties were out of favour with institutional investors. A toxic combination of an overbuilding of stores and the severe disruption caused by the rise of e-commerce undermined sentiment towards the asset class, particularly in the United States and Britain.
The Covid-19 pandemic has served as an accelerant for the shift to online sales, putting further pressure on the sector and bolstering the appeal of other types of property. In the US and Canada, retail’s share of investment transactions has fallen from close to 20 per cent in 2015 to less than 10 per cent in the first quarter of this year, according to CBRE data.
By contrast, deals in the industrial and logistics sector have surged from 15 per cent in 2018 to more than 25 per cent at the beginning of this year, a similar trend to the one in Europe. The sector has been the main beneficiary of the pandemic-induced shift to online shopping.
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However, certain types of retail properties have benefited from the pandemic. Meanwhile, a correction in prices has also left the sector with the most attractive rental yields in commercial real estate.
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