Retail sales at brick-and-mortar stores have been contracting continuously as shoppers do more buying online. And the reasons are obvious, according to a new investment outlook from Verwaltungs- und Privat-Bank Aktiengesellschaft (VP Bank) a Liechtenstein-domiciled investment bank.
While based in Europe, VP Bank’s analysis is particularly pertinent for U.S. retail investors.
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Online buying is convenient and generally cheaper, according to Bernhard Allgäuer and Rolf Kuster, alternative investment managers of VP Bank. Also, online shoppers generally consider the comments of other shoppers as veing more trustworthy than information provided by the manufacturers themselves. The number of internet users continues to grow. Consumers who are 50 or over (silver surfers) have been identified by internet marketing as a key target group on account of their strong purchasing power.
Hardest hit by falling shop sales are small retailers that do not have an internet presence or mailing service. An estimated 10% - 15% of such shops are expected to close by 2015, VP Bank estimates.
Amazon, with estimated sales of $62 billion in 2012 and annual growth of 30%, will also have an impact on large retailers in the longer term. Last spring Amazon announced that its staff numbers had climbed by 70% compared with the previous year. Last fall, its 68,000 workforce was augmented by 50,000 part-timers, many of whom can expect to be given firm jobs after the Christmas period.
According to Allgäuer and Kuster, this e-commerce revolution will have no effect on existing real estate, because leases are usually long-term. However, the investment bank does expect a general decline in the development of new premises.
To counter this trend, VP Bank suggests CRE investors look at the growing demand for logistics centers being set up to move goods closer to the consumer. This may cushion the impact on real estate shares and offer new opportunities for specialized logistics providers. For investors, this means that actively managed real estate funds are preferable, according to VP Bank.
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