Originally published March 2021.
For many years retail has been the second-largest invested asset class in the commercial real estate world. But now, being one of the sectors most hard-hit by covid-19, it is often leaving investors nervy, and has become an area that many are seeking to avoid. According to the latest data from Real Capital Analytics (RCA), investment into Asia-Pacific’s retail property sector dropped 41% year-on-year in 2020, with the most significant declines seen in large shopping centers and retail portfolios. What is the future of retail?
We were already hearing a lot of talk around experiential retail, online to offline (O2O) and omni-channel retail some time before the breakout of covid-19, with traditional brick-and-mortar retail becoming increasingly under threat from the rapid growth of e-commerce. Asia-Pacific is now the largest e-commerce market globally, with an estimated US$2.4tn of online sales in 2020, more than triple the market size of North America, and nearly five times that of Western Europe, according to Statista.
Led by China, Asia-Pacific’s online retail market is already ahead of its peers in many areas, such as having a well-developed logistics network and transportation system, and an advanced online payment system. In turn, this means that Asia-Pacific will also need to be a pioneer in the evolution and transformation of its physical retail space.
By definition, retail is the sale of goods to the public. But in the retail real estate arena, it can no longer just be the sale of goods, the process of which is increasingly being replaced by e-commerce. Retail real estate has become more of a social destination, a community centre or town square in which for people to socialise, have fun and enjoy life. It is not only the sale of goods, but also the sale of experiences, feelings, imaginations and lifestyles.