Retail bull?

While I’m trying to look at more things through the bullshit detector provided by Lucy Kellaway in the FT (and the associated link to the very interesting sounding module on Calling Bullshit in the Age of Big Data  offered at University of Washington), there was a good piece in the FT last week on  shifting sentiment about and structural change in the retail sector.  It’s US-focussed but has lots of interesting material in it.  Broadly, it confirms bearish sentiment about the retail sector in general.  The latest IPF Consensus Forecasts are basically for zero nominal growth in shopping centre rental and capital values over the next five years.    The FT piece confirms

Analysts at Green Street Advisors argue that “low growth is the new normal”, while market rents are becoming decoupled from tenants’ revenue growth as more sales move online.  “[Rents] are at a price point now that exceeds what retail sales can perform…

Compared to the US, there doesn’t seem to have been the same drop in shopping centre specialists share prices.  Shares in Intu have fallen by about 10% and Hammerson have hardly changed since last summer.

Investors have caught the gloomy mood: shares in US retail Reits have tumbled by almost 25 per cent since their peak last August, according to Dow Jones, compared with an 11 per cent decline across all Reits.

Then, there’s the hoary old adage that estimated price changes in the direct, private real estate markets tend to lag actual price changes in the indirect, publicly traded’ listed real estate sector.

Capital values in the private markets have yet to mirror that shift, but listed shares often act as a bellwether.  Meanwhile, hedge funds are building up significant short positions against retail players. Short interest against international retail Reits has more than doubled to $12.5bn since November,…

Apparently, the big change which many of us can see on the High Streets is fairly structural

Food “can now act as an anchor”, according to the International Council of Shopping Centers. “As demand for traditional merchandise space abates, demand for food service space appears insatiable.” A well-stocked food hall can draw shoppers, particularly millennials, who look to spend money on experiences; food has the added benefit of being “internet resistant”, according to analysts at Green Street Advisors. “Convenience used to be a bad word. Today it’s a much better word, and a big part of that is food,” says Robert Burke, founder of luxury brand consultancy Robert Burke Associates. “The right food and the right entertainment are now the key components of a shopping centre.”

Maybe calling it insatiable is bull…

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