Is E-Commerce an Investment Risk Priced by Retail Real Estate Investors? An Investigation

Abstract

The emergence of e-commerce over the last two decades has substantially disrupted the business of retailers operating physical stores. As a result, the question arises as to how e commerce in turn affects pricing of retail real estate assets and thus investors should be concerned with e-commerce. Using return series data of shopping centers from the NCREIF property index for the period of 2000 Q1 to 2018 Q4, we find that e commerce sales can predict changes in retail real estate market returns. In particular, an increase in the share of e commerce sales to total sales results in lower capital and total returns for retail real estate. In contrast, no impact on income returns was found. Alongside revealing that e commerce has informative value for investors, this study contributes to the broader literature on asset pricing in commercial real estate markets while bridges this gap in the retail real estate literature.