(HOUSTON) –After years of turmoil, the retail sector is showing promise as a potentially compelling investment opportunity, according to Hines, a global real estate investment manager. A new whitepaper from Hines Research titled, “Retail’s Next Act,” delves into the dynamics providing tailwinds for a sector that has been transformed by the rise in e-commerce.
“We believe a new era for certain types of retail is here,” said David Steinbach, global CIO of Hines. “Retail fundamentals appear strong in many markets around the world, creating a powerful case for real estate investors to pay close attention to this sector.”
The proprietary research outlines encouraging signs of strength in retail globally, as the space has evolved in the face of structural change. Key indicators of retail’s potential recovery identified by Hines Research include:
- Right Sizing to a New Demand Reality: Constrained supply over recent years means that retail appears to have “right sized” to meet a new demand reality, and as e-commerce growth rates have declined, brick-and-mortar retail demand has re-sized.
- Healthy global labor markets have helped to fuel strengthening consumer consumption: Opportunity has emerged as record low vacancy rates combine with positive global economic trends including rising wage growth and strong consumer demand.
- The potential investment opportunity: Multiple retail subtypes have positive net operating income growth (in the U.S.) and rent growth (in Europe and Asia) while also experiencing declines in pricing.
- Retail’s role in “place-making”: Research suggests that having a grocery anchor matters for open-air retail subtypes in the U.S., including power, neighborhood and community centers.
- Tourism’s role in retail’s recovery: Regional tourism can support retail activity and consequently retail property fundamentals, aided by phenomena like post-pandemic “revenge” spending.
“Retail has faced headwinds ranging from e-commerce to COVID and the Great Financial Crisis,” said Michael Hudgins, senior managing director of Hines Research. “In our opinion, we’re seeing that winners in this sector have been sorted after years of little new development, and what seems to be a levelling off of e-commerce’s encroachment on brick-and-mortar’s market share.”
Hines’ “Retail’s Next Act” research paper is available for download on the Hines website.
About Hines
Hines is a leading global real estate investment manager. We own and operate $93.2 billion1 of assets across property types and on behalf of a diverse group of institutional and private wealth clients. Every day, our 5,000 employees in 30 countries draw on our 65-year history to build the world forward by investing in, developing, and managing some of the world’s best real estate. To learn more, visit www.hines.com and follow @Hines on social media.
¹Includes both the global Hines organization and RIA AUM as of December 31, 2023.
