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.
Among all the types of retail real estate, grocery stores proved the most resilient during the pandemic. They are underpinned by the surge in online sales, physical stores’ irreplaceable role in the food distribution process and the strength of grocer covenants. a correction in the prices of retail assets, which began before the pandemic erupted, has intensified in the past year, especially in the UK. This has happened at a time when the prices of highly sought-after logistics assets continue to rise sharply and when yields on office assets remain remarkably stable despite the shift to remote working. This puts Asia in a unique position. Better placed to cope with digital disruption and at the forefront of omnichannel shopping, the region’s retailers have been more successful in future-proofing their assets and operations, putting them on a more secure footing than their Western peers.