Retail Real Estate Research Articles

The heterogeneous response of real estate prices during the Covid-19 pandemic

Abstract We estimate the transmission of the pandemic shock in 2020 to the residential and commercial real estate market by causal machine learning, using granular data for Germany. We exploit differences in the incidence of Covid infections and short-time work at the municipal level for the identification of epidemiological and economic effects of the pandemic. We find that (i) a larger incidence of Covid infections temporarily reduced rents for retail real estate; (ii) a larger incidence of short-time work temporarily reduced rents of office real estate; (iii) the pandemic increased prices, particularly in the top price segment of commercial real estate.

A framework for the management of retail assets

PurposeThe retail investment landscape in the UK has drastically changed. Understanding owners’ responses to this structural change is critical to gain insight into protecting investment performance. This paper identifies and evaluates the tactics and strategies being adopted.Design/methodology/approachThis paper employs a mixed methods research approach, using data collected from semi-structured interviews with professionals involved in the retail investment process. This is supplemented by secondary market data analysis.FindingsThe paper assesses the practical responses made by retail property owners/managers, structured around emerging sub-themes. Actions include mitigating short-term risks through greater use of temporary tenants/licensees and independent retailers, preparing generic “white box” retail space to capture remaining tenant demand, exploiting the tenant mix to provide “the retail experience,” and applying new technologies and processes in a sector where systematic risk remains high. A new framework for retail asset management has been developed.Research limitations/implicationsThis study contributes to the retail asset management literature and understanding of the way the contemporary retail landscape is shaping investment management behaviour.Practical implicationsThe developed framework provides guidance to real estate managers developing a retail real estate management strategy and will help them recognise tactics to better support the evolving retailing market.Originality/valueThe new framework adds new insights to understanding the process for managing retail assets and the actions necessary for asset managers to address economic/functional obsolescence and sustain asset investment values.

A methodology for determining the investment attractiveness of retail real estate in global markets

A methodology for determining the investment attractiveness of retail real estate in global markets

Commercial real estate prices in Europe after COVID-19

PurposeThe article aims to analyze the behavior of commercial real estate prices in Europe, with a focus on the post-coronavirus disease 2019 (COVID-19) pandemic period. The authors use national and city-level data for the various commercial real estate sectors in ten countries, as well as listed real estate data, to assess any differences across property type and space.Design/methodology/approachThe authors analyze the behavior of commercial real estate prices after the COVID-19 pandemic, emphasizing differences across property types. For that purpose, the authors use national and city-level direct real estate data for the ten largest countries in terms of market capitalization, as well as listed real estate data. The article then turns to discussing the likely trajectory of commercial real estate prices in the future.FindingsThe recent rise in interest rates and geopolitical instability have affected prices differently across sectors. Industrial properties benefited from the pandemic, although prices declined significantly in 2022. Residential properties continued their upward price trend and have been the best-performing property type during the last two decades. Retail real estate continued its downward price trajectory. Thus far, office markets do not appear to be significantly affected by structural changes in the sector. The data for listed real estate markets in Europe suggest that markets bottomed out in early 2023.Originality/valueThis paper provides for a better understanding of the behavior of commercial real estate prices in Europe since the COVID-19 pandemic. The authors assess whether the effects found during the COVID-19 crisis were temporary or long-lasting. Also, many economic and political uncertainties have emerged since the beginning of the Ukraine war in February 2022, and it is important to analyze the effects of such uncertainties on commercial real estate prices.

The underestimated global warming potential of refrigerant losses in retail real estate: the impact of CO2 vs CO2e

PurposeThis paper investigates the impact of CO2 vs CO2 “equivalents” (CO2e) by analyzing fugitive emissions, with a particular focus on Fluorinated gases (F-gases), arising from refrigerant leakages in buildings. F-gases are an especially powerful set of GHGs with a global warming potential hundreds to thousands of times greater than that of CO2.Design/methodology/approachThe significant impact of CO2e is tested by means of an empirical study with current consumption data from German food retail warehouses. This evaluation involves the analysis of the Carbon Risk Real Estate Monitor's country- and property-type specific pathway, coupled with a paired samples t-test to examine the hypotheses. The assessment is undertaken by evaluating the type of gas and the amount of leakage reported in the baseline year, subsequently converting these values to CO2e units.FindingsOn average, F-gases account for 40% of total building emissions and nearly 45% of cumulative emissions until 2050. In light of ongoing climate change and the rising number of Cooling Degree Days (CDDs), it becomes imperative to assess both the environmental and economic impact of F-gases and to transition toward environmentally friendly refrigerants.Originality/valueThe analysis sheds light on the seldom-addressed threats posed by CO2e emissions stemming from refrigerant losses. By identifying these threats, investors can devise strategies to mitigate potential future costs and carbon risks.

Tenant stock market performance and retail Real Estate prices

ABSTRACT We investigate the predictive value of tenant stock market performance for retail real estate transaction prices. In our empirical investigation, we focus on discount and non-discount (i.e. premium and mid-tier) department stores, which represent important anchor tenant groups in general-purpose shopping centres. We first show that the industry-level stock market performance of non-discount department stores, but not discount department stores, predicts retail real estate investor sentiment and total returns in the next quarter. Explanations for our findings include the struggles of non-discount department stores with changing consumer preferences, e-commerce, and discount competition, which affect their credit, bankruptcy, and store closure risk. Using a sample of 5,507 general-purpose shopping centre transactions, we then provide evidence that the stock market performance of non-discount department stores in the previous quarter has a positive relationship with transaction prices for shopping centres in lower quality locations (suburban) and of lower property quality. The stock market performance of discount department stores only has predictive value for transaction prices of malls with the highest risk to investors.

ОСОБЕННОСТИ РАЗВИТИЯ РЫНКА НЕДВИЖИМОСТИ САНКТ-ПЕТЕРБУРГА В КРИЗИСНЫЙ ПЕРИОД

The features and prospects of development of the primary real estate market of St. Petersburg during the crisis period have been revealed, the volume of demand for real estate in the primary market of St. Petersburg has been estimated, the price dynamics in the primary and secondary real estate market of St. Petersburg for the period January 2020 – April 2023 has been presented. The main trends, problems and prospects of the retail real estate market have been revealed. The dynamic series of attendance rates in the shopping malls in 2022, the level of occupancy of retail facilities, the dynamics of rental rates for anchor tenants and space in the retail gallery were plotted. The levels of operating costs and profitability indicators for retail space have been revealed. The methods of synthesis, induction (inductive generalization (empirical)), concretization, comparison and analysis of dynamic series have been used in the work. The authors came to the conclusion that the prerequisites listed in the article for the analyzed period (demand decrease, economic crisis, drop of real incomes of population) will contribute to the reversal of growth tendency to the reduction of prices on the primary and secondary real estate market of St. Petersburg. It was noted that the crisis in the market of retail real estate in Saint-Petersburg has its own characteristics and requires from entrepreneurs to make non-standard decisions and be ready for the changes in the market.

The spillover effect of E-commerce on local retail real estate markets

Using retail property transaction data and e-retailers’ fulfillment center openings from 2010 to 2014, we find that e-commerce expansion–measured by e-retailers’ fulfillment center openings–increases retail property values by 5.2% in counties with fulfillment center openings compared to similar counties with no openings. The effect appears in year two following the fulfillment center opening and persists through year five. This indicates a persistent divergence in retail property prices between the treatment and control groups. The increase in retail property values is accompanied by a significant boost in employment, wages, and business establishments in the transportation and warehousing sector, supporting the income channel hypothesis. However, we find limited evidence for the substitution channels. Notably, the impact is more pronounced in areas where fulfillment center workers are likely to reside.

A model of international economic integration in commercial real estate markets

Subject. This article discusses the changes in the global retail market, economic models of interaction, and integration tools in international retail real estate markets. Objectives. The article aims to analyze the development of the global retail market, trends in real estate investment, identify the main patterns of integration mechanisms of international real estate markets, as well as develop an economic model. Methods. For the study, we used the methods of scientific knowledge, induction, analysis, synthesis, and comparison. Results. The article identifies the main trends in the development of the global retail and real estate investment market, formulates the patterns of functioning of investment models of international cooperation in the construction of commercial retail real estate. The article also presents an author-developed model of integration incentives in the retail real estate and retail markets of friendly countries. Relevance. The proposed model for stimulating the retail real estate and retail markets can be applied by representatives of countries experiencing external sanctions pressure on the economy, as well as partner States to launch new ways of international economic integration, improve the investment attractiveness of retail real estate, enhance the retail development, and attract new foreign players.

Relevance of zoning small to medium size (StMS) shops in contemporary English valuation surveying practice in Newcastle upon Tyne, England

PurposeIn English valuation practice, when valuing small to medium size (StMS) shops, rental analysis is undertaken using zoning based on the argument that shop fronts including window displays attract customers to shops and that most trading takes place in the internal frontage area making it the most valuable part of shops. Albeit zoning has been critiqued, it remains the preferred method of rental analysis. The paper aims to answer two research questions: are shop fronts including window displays the only factor that attracts customers to shops? And is the frontage space within shops the area most trading takes place?Design/methodology/approachThe exploratory qualitative research methodology was used, and primary data collected by observing 178 shops in selected five shopping areas. The observational data were complemented with the use of secondary data.FindingsThe study has shown that shop fronts are not the only factor attracting clientele to shops as there are other varied factors including location, availability of Internet and hoardings. There is no evidence to suggest most goods in shops are displayed at the frontage space that attract most customers to that area, thereby, making the area the most valuable part, which decreases backwards.Practical implicationsThese findings coupled with extant research evidence implies zoning can lead to under or over valuation of StMS shops (which is not good for retail real estate (RE) management or market), and turnover generated from shops is the overarching determinant of rental values in valuation.Originality/valueThis is the first time the very foundation/underpinning principles of zoning have been subjected to scrutiny in England.

Governmental Restrictions and Real Estate Investor Risk Perception.

We investigate the impact of governmental restrictions on the short-term risk perception, as proxied by the going-in cap rate, of investors in regional and neighborhood shopping centers. We use the COVID-19 pandemic as a natural experiment and proxy for the length and severity of COVID-19 restrictions with the political affiliation of state governors. Using a sample of 40 metropolitan statistical areas (MSAs) across 27 states over the period of 2018 to 2021, we find that for states with Republican governors, which proxy for shorter and fewer COVID-19 restrictions, investors in regional malls required a lower going-in cap rate in the pandemic period than for states with Democratic governors. This effect does not exist for neighborhood shopping centers, whose tenants were not as affected by COVID-19 restrictions. Robustness checks suggest that our findings can be explained with mask mandates as one type of governmental restrictions, and that COVID-19 related restrictions do not impact the long-term risk perception of retail real estate investors. We furthermore find that the political attitudes of an MSA have an impact on investor risk perception.

Approach to the assessment of the competitiveness of real estate objects in retail

In the last few years, due to economic, political and social events, the situation in the retail real estate market has changed significantly. As consumers increasingly choose to shop online, shopping malls are shifting from multi-vendor and branded merchandise to multifunctional spaces that combine fitness, catering and entertainment areas, business meeting spaces and organization of exhibitions. The desire of buyers to save time, as well as satiety with the usual shopping format, contributes to the introduction of new technologies and retail formats by retailers. The purpose of the study is to identify key indicators of the competitiveness of real estate in retail. Research objectives: analysis of trends in the retail real estate market of St. Petersburg, determination of an integral indicator of the competitiveness of retail real estate objects. Research methods: comparison, analysis and synthesis, generalizations, peer review method. As a result of the study, key factors of competitiveness were identified and a methodology for calculating the competitiveness index of retail real estate objects was presented.

스타벅스 매장의 공간구성요소에 관한 탐색적 분석

This study examined the spatial characteristics of Starbox stores through exploratory factor analysis that discovers detailed spatial components based on the spatial experience experienced by visitors to Starbucks general stores. As a result of the analysis, a total of five factors were grouped and derived, and each factor was named as ‘culture/artistry’, ‘five senses/hospitality’, ‘behavior/psychology’, ‘taste/hardware’, and ‘lead/pandemic’. Through exploratory factor analysis based on the visitor's experience, the significance of this study was able to identify the cause of continuous visits to Starbucks stores and infer detailed components related to Starbucks' third place, which shows a commercialized space but differentiated place. This is a strategic projection of Starbucks' corporate philosophy and ideology into space and place, and it is judged that this positioning is perceived and experienced by the visitor group through five senses.It is judged that these attributes will be a very important space and place strategy for commercial real estate, especially retail real estate, which requires continuous visits. As a future research topic, the factors derived through exploratory factor analysis are independent variables, and it is necessary to measure dependent variables for visitor satisfaction and revisit intention, and to analyze visitors by group to examine the differences.nalyze visitors by group to examine the differences.

Salespeople’s performance and digital technologies in real estate: Evidence from the Portuguese retail real estate sector

The digital transition is an unstoppable process that affects consumers and companies. Consequently, new sales strategies oriented to the application of digital technologies are needed to increase the performance of sale teams. Based on a sample of 517 responses from salespeople of the retail real estate, the data were analysed using the Structural Equation Modelling and Generalized Logit Model. The results validate a conceptual model which shows that digital orientation has impact on the salespeople’s skills and on the implementation of the sales strategy. Furthermore, it is revealed that the salespeople’s skills influence the implementation of the sales strategy and that both constructs impact the sales performance. Finally, the study shows the positive role of the salesperson’s experience and the negative role of age on sales performance.

Expediency of Investments in Real Estate Sector

In India, with the liberalization of the economy, the real estate industry has grown in prominence. As a result of the increasing business possibilities and labour migration, demand for commercial land property for both housing and industrial building has grown. The retail, hotel, and entertainment industries all have an impact on real estate developments. The research looks at the motivation, awareness, and profitability of retail real estate investors. The study design comprises descriptive research, in which various elements of real estate investments are studied. The demographic profile of real estate investors, motivation, and profitability in real estate investments were investigated in this study. A total of 314 samples were used in this investigation, and data was obtained using a questionnaire. Simple percentages analysis, descriptive statistics, factor assay, chi-square, and regression were utilized as statistical techniques. Individual investors have adequate awareness, motivation, and profitability in real estate investing.

РЕДЕВЕЛОПМЕНТ И РЕКОНЦЕПЦИЯ ИЗБЫТОЧНОЙ ТОРГОВОЙ НЕДВИЖИМОСТИ

The retail real estate market is oversaturated. This forces the owners and investors to reconsider the design of the existing facilities to meet the needs of new visitors. The purpose of the research is to re-evaluate the commercial real estate market in Yekaterinburg to solve the problem of excessive outdated shopping areas and to adjust them to the needs of Y and Z consumers. This can reveal the promising areas for redevelopment and reconception of outdated commercial real estate in shopping, sports, cultural, and entertainment centers. The most significant results characterizing the scientific novelty of the study are as follows: the commercial real estate market in Russia was analyzed for the period 2019–2022, retail trade in Sverdlovsk region was examined for the period 2017–2021, the largest shopping and entertainment malls in Yekaterinburg were assessed by their opening date, total and retail area, category, availability of parking space, food court, cinema, gaming zones, etc.; the key drawbacks of outdated shopping malls were systematized from the perspective of new generation consumers; the authors analyzed the facilities available in Yekaterinburg for organizing leisure events in the areas such as concerts and touring, educational and leisure activities, sports events to justify the need for SECs; the concept of redeveloping an irrelevant site into a leisure, entertainment and cultural recreational center was proposed, with the center satisfying the needs of Y and Z generations; the trend for the development of cultural and entertainment facilities was identified; the redevelopment project was financially and economically reasoned; and its efficiency was proven. Further research is associated with a more detailed analysis of outdated shopping mall redevelopment into the entertainment sites which are popular among Y and Z generations. This can fill the gaps in the existing methods of its evaluation.

Is e-commerce an investment risk priced by retail real estate investors? An investigation

ABSTRACT Over the last 20 years, online shopping has evolved into a major threat to the physical retail store. We investigate whether retail real estate investors price e-commerce as an investment risk. In particular, we analyse whether e-commerce sales have informative value for retail real estate returns. Focusing on institutional-grade shopping centres over the period of 2000 to 2018, we find that e-commerce sales predict total returns in the next quarter. This effect is driven by capital returns, which suggests that e-commerce is indeed priced as an investment risk. While consistent across mall types, this effect is stronger for regional and super-regional malls than neighbourhood and community shopping centres. Explanations for this difference include the types of retail tenants in these different mall categories and the varying impact of e-commerce on their business.

Features of determining the market value of retail real estate and individual trade related properties during pre-trial evaluation and forensic examination

The present article deals with the specifics of valuation of retail property and individual trade related properties on the basis of the international experience and as recommended by International Valuation Standards and RICS (The Royal Institution of Chartered Surveyors (Great Britain)) valuation standards (Red Book). The present article is justified as currently Russia lacks a standard, uniform for the valuers or legal experts, to be used for the purposes of valuation of similar subjects. At the same time, methodical literature is insufficient while there are numerous property disputes that call for pre-court valuations and expert evidence of valuation of such subjects, including numerous litigations arising out of bankruptcy or establishing cadaster value to the amount of market value. The author reviews the existing approaches to valuation of real estate in accordance with both the international and national standards and awards professional recommendations pertaining to the use of the income approach to value retail real properties and individual trade related properties. The definitions and metrics of the above real properties’ groups are described separately. Also, the author provides guidelines for inquiry of the documents and information necessary for the acquisition of the data to be used in the course of valuation and expert evidence. All pricing factors are described in detail in the present article against the examples of retail real properties and individual trade related properties (say, hotel) and explanation of their effect on the market value in case the income approach is applied is provided.

How would the COVID-19 pandemic reshape retail real estate and high streets through acceleration of E-commerce and digitalization?

This paper aims to explore the impact of the COVID-19 pandemic on retail real estate and high street landscape through acceleration of e-commerce and digitalization. The retail business have been evolving over the past several decades, accentuated by the evolution and development of digital technologies. Almost all parts of the world have witnessed the changes in consumer behavior, the nature of retail, and reshaping of the high street landscape due to the e-commerce revolution and continued expansion. Especially due to the COVID-19 pandemic, the retail platforms powered by digital technology had to be adapted quickly, and it is expected to continue to support this change as consumers and retailers adjust to new normalities. Moreover, retail real estate is intricately linked with the retail sector dynamics. While lockdown and social distance rules have devastating impacts on “traditional” retail property sector, it may accelerate the evolution process of multi-channel retail and the channel integration role of physical stores and thus, bring in transformations in urban-retail landscape. It is not necessarily leading to an end of high street stores, but it may have a significant impact on retail real estate business. There remains a lack of understanding of how these changes may pan out with a rigorous academic investigation. To close this knowledge gap, we analyze both the strategy event data of a range of UK retailers as well as the insights from interviews with retail asset manager and landlords using a mixed-method approach. The findings indicate an urgent need for physical shops to reposition the functions of their multi-channel business. Our analysis provide significant insights and highlight several implications for retailers, landlords and, also policy-making units dealing with urban regeneration and local economic development in the post-COVID-19 world.

Dynamics of commercial real estate market segments in the post-pandemic period

Research background: Commercial real estate segments have reacted differently to the effects of the coronavirus pandemic, announced early last year. Thus, the greatest interest is represented by commercial, service and warehouse real estate. The retail segment seriously felt the restrictions in the work of retail and service enterprises from March to July 2020 – due to the rotation of operators, the departure of many players from the market, the vacancy rate of space increased, the average rental rate decreased due to the revision of lease agreements. Warehouse real estate, on the contrary, has received incentives for development due to a twofold increase in online trade in Russia – the vacancy rate in the most high-quality areas tends to 0-2%, the average rental rate is growing rapidly. Purpose of the article: to analyze the commercial real estate market in the context of retail and warehouse real estate in the regions of Russia and St. Petersburg, to develop mechanisms to increase their competitiveness in the postcovid period. Methods: description, comparison, analogy, generalization and correlation and regression analysis. Findings & Value added: there is a high dependence of the current state of retail and warehouse real estate on the growing volumes of online trade, which causes certain trends: the growth of the shortage of warehouse space and the increase in the vacancy rate of retail space-mechanisms have been developed to increase the competitiveness of commercial real estate operators in St. Petersburg and the regions