Savills plc

07/27/2021 | Press release | Distributed by Public on 07/27/2021 02:59

Mixed-use retail and logistics assets are only a click away

There is no doubt that the balance between retail and logistics investment has shifted significantly over the course of the last 12 months. Fueled largely by the move to online retail, logistics in particular has become the darling asset class of real estate. Nevertheless, at what cost does this come to retail? According to surveys from INREV and ANREV, quite a high one: only 29 per cent of institutional investors plan to buy retail in 2021, while more than 75 per cent plan to buy logistics.

While this is not strictly true for all types of retail (2020 was a strong year for investment into the grocery sector thanks to essential retail remaining open during global lockdowns), there is a fundamental need for other retail to evolve in order to win back investors.

Logistics and retail working in harmony

Key to winning this investment will be retailers configuring their space to make experience at the centre of the customer visit. While buying online will always be easier - a click is not an experience and retailers will need support from landlords in order to optimise the physical space to draw in consumers. This experience also needs to extend across all retail sub sectors, including shopping centres, which have borne the brunt of negativity when it comes to attracting institutional capital.

Adding a mixed-use element to the asset, so people can dine out, watch a film, play sport or even go to the doctor, the gym, the local library, visit a coworking space, a spa/wellness centre before and after shopping, will be crucial to success.

Logistics space can also complement experiential retail; smaller logistics units in shopping centres or town centres can save shoppers' wrists by picking up and delivering a day's shopping. For example, the Dubai Mall in the UAE will deliver shopping deposited with them to your home on the same day.

A complex infrastructure

Fulfilment centres in retail locations may also be a solution to the environmental and financial problem of returns. The toll on the environment from deliveries, returns and packaging will become an even greater focus for pressure groups, governments and therefore also for the real estate sector. Bringing retail and logistics together, especially at locations such as transport hubs could help to lessen that impact.

Asia provides an example of how retail and logistics might develop together given both sectors have evolved alongside ecommerce. China's Chongbang Group builds fulfilment centres where customers can collect, try on and return items from online retailers as part of its mixed-use developments. In turn, this is positive for footfall, which promotes retailer success.

While it's clear that retail won't be like it used to be - there will be less 'pure' retail space in favour of a mix of uses where the lines between retail and logistics becomes blurred - this is more strongly correlated with the wider evolution of retail estate. Making the most of this will require investors to think beyond either/or and require more work from valuers to assess hybrid spaces.

Further information

Contact Eri Mitsostergiou

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