Page 36 - February 2020

MARK FAITHFULL

Following

the Money

Mark Faithfull crunches the numbers and takes a look at the market as
retailers and investors dampen the view on retail real estate in early 2020 news

technology fIrm looks to exIt retaIl outlets Investors prepared to take a rIsk, but not on retaIl
o add to a rather bleak column, audio specialist Bose is hile institutional investors The survey indicates that a total of
significantly shrinking the number of retail stores it operates have signalled a greater €98.1bn of new capital is expected to be
T because of the “dramatic shift” to online shopping. The maker Wappetite for risk in the invested in real estate globally in 2020.
of high-end electronics said it is closing 119 retail stores worldwide year ahead, according to the global The lion’s share (61 per cent) will come
across North America, Europe, Japan and Australia. It will continue to Investment Intentions Survey 2020 from investors in Europe, with just
operate about 130 stores throughout China, the UAE, India and some from INREV, ANREV and PREA, retail’s under 20 per cent each from investors
Asian countries. travails mean the sector has taken a hit in North America and Asia Pacific.
Bose said that it no longer needs many of its brick-and-mortar in terms of appetite. The contribution from European
stores because its customers are buying their products online. In all, 20 per cent of global investors investors is expected to rise from
“Originally, our retail stores gave people a way to experience, test, investing in Europe – including a €32.5bn in 2019 to an estimated €54.1bn
and talk to us about multi-component, CD and DVD-based home majority of those domiciled in the over the next two years and Europe is
entertainment systems,” said Chief Executive Colette Burke. “At the time, region – cited ‘opportunity’ as their expected to attract significant volumes of
it was a radical idea, but we focused on what our customers needed, and preferred investment style. This is up capital amounting to €39.8bn compared
where they needed it - and we’re doing the same thing now.” from 9.8 per cent last year and marks with €28.3bn destined for Asia Pacific
The closures illustrate the likelihood of another brutal year for the the highest percentage since 2009. and €19.4bn targeted at North America.
retail industry. In 2019, US retailers announced 9,302 store closings, a These results reflect investors’ ongoing Investors active in Europe retain a
59 per cent jump from 2018 and the highest number since Coresight search for alternative ways to deploy preference for Germany (67 per cent),
Research began tracking the data in 2012. capital and drive returns in the face of the UK (63 per cent) and France (57
continued low interest rates and low per cent). For funds of funds the top
yields. They also build on a continuing three country preferences are Germany,
trend, with investors having on average France and the Netherlands all in equal
allocated more than 12 per cent of their first position selected by 90 per cent of
total real estate AUM to opportunity the cohort.
strategies in 2019 – an increase of However, the poor performance
almost 50 per cent compared with the of retail over recent years seems to
previous year. have impacted its ranking. European
North American investors led investors have signalled retail as their
the charge, increasing allocations to fourth preferred sector at 50 per cent.
opportunity style investments from Investors in North America also rate
15 per cent in 2019 to 37 per cent. it fourth at 43 per cent, as do those
Investors from Asia Pacific upweighted in Asia Pacific (31.3 per cent). Only
their exposure to opportunity from a tenth of funds of funds express a
3.3 per cent to 7.2 per cent as well as preference for the retail sector.
raising their allocations to value added Offices top the list of preferred
strategies from 6 per cent to 9 per sectors for investors with industrial/
cent over the same period. European logistics and residential ranked equal
investors slightly reduced allocations to second. For the first time since 2012,
opportunity from 5.6 per cent to 5.4 UK retail failed to make the top 10
per cent, focusing on core instead. preferred combinations for investors.

us retaIlers questIon marketIng value of tImes square
ap and Cover Girl are among retailers looking to leave stores in the district,
where companies have historically been willing to swap high rent payments
G for daily exposure to hundreds of thousands of tourists and commuters.
But as shopping moves online and bricks-and-mortar spaces shrink, real estate
brokers are on the hunt for new tenants to occupy a pair of adjacent flagship stores
at 1530 and 1532 Broadway - one for Gap and one for its discount brand Old Navy.
There is also space available at 30 Times Square, where beauty giant Coty Inc
opened its first-ever Cover Girl store a little more than a year ago. Those come on top
of a four-story flagship at 1551 Broadway that American Eagle Outfitters may depart.
This echoes what I have heard from local agents, that the previous high rents being
paid in prime Manhattan locations for the marketing value are now being questioned
by many retailers. While central New York remains a retail beacon, the high prices
demanded for both rents and fit-outs are starting to put traditional retailers off.
Times Square hasn’t been hit as hard as other neighbourhoods, but Gap Inc.
has roughly 80,000sq ft at the two locations in Times Square, with leases that
run through 2032. Coty has about 10,000sq ft across five floors that are being
marketed for sublease through 2021.