Real Estate Investor Magazine South Africa October 2015 | Page 49
ELECTRONIC SHOPPING AND MAIL ORDER AS % OF RETAIL SALES
Source: US Census Bureau, Cowen and Company
from this. However, over the last few years there has
been a decrease in the rate of shopping centre growth,
as seen in the chart below.
Notwithstanding the fact that shopping centre
growth has almost ground to a halt over the last few
years, retail sales growth has been steady. The disparity
in shopping centre growth versus retail sales growth can
to some extent be attributed to the increase in online
shopping relative to total retail spend. The following
chart reveals an interesting trend.
Albeit off a low base, it is clear that an increasing
proportion of retail spend is occurring through online
channels.
According to research by Cowen and Company, the
sharp decline in retail development over the last few
years may be more than a transient blip. Increases in
GLA are likely to remain depressed over the foreseeable
future. Reasons for this include:
• Higher market penetration has moderated the
necessity for significant surges in retail space.
• Suburban centres are largely landlocked, making
further expansion spatially challenging.
• Online shopping has somewhat obviated the need
for physical stores.
In addition to decreasing the need for physical
stores, increasing online shopping also has supply
chain ramifications, as virtual purchases necessitate
warehouse storage as well as adequate distribution
capabilities.
www.reimag.co.za
A REIT that is benefitting from the shift in consumer
purchasing behaviour is US-listed Prologis. It is a
global logistics and distribution operator that provides
essential warehousing and distribution capabilities, key
components of the online retail supply chain.
A crucial aspect of Prologis’ strategy is to own and
operate facilities near main seaports, airports and
highway interchanges. This calculated positioning
allows them to most profitably store and distribute
goods to customers whose businesses are linked to
global trade and who depend on the efficient movement
of goods through the global supply chain.
The secular shift towards online shopping is forecast
to perpetuate the strong demand cycle for Logistics
REITs and makes a compelling case for long term
investment into this REIT sector.
REIT INVESTMENT BENEFITS
• Diversification: Long-term Equity REIT returns have recently
exhibited low correlation to the returns of the broader stock
market, providing diversification benefits.
• Dividends: Stock exchange-listed REITs have provided a
stable income stream to investors.
• Liquidity: Stock exchange-listed REIT shares can be easily
bought and sold.
• Performance: Over most long-term horizons, stock
exchange-listed REIT returns outperformed the S&P 500,
Dow Jones Industrials and NASDAQ Composite.
• Transparency: Stock exchange-listed REITs operate under
the same rules as other public companies for securities
regulatory and financial reporting purposes.
OCTOBER 2015 SA Real Estate Investor
47