What is the impact of e-commerce on Retail Real Estate Industry?

It is hard to isolate just e-commerce from other factors such as economics, demographics, income, technological advancements and judge the impact on overall retail performance.  E-commerce is growing at a fast rate, but a turnover in brick-and-mortar stores remains positive. There is also a sense that online shopping is becoming the dominant way majority of people shop. In reality, even with a significant share change, e-commerce still represents less than 10% of total retail turnover and is expected to remain under 20% in the next five years.

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PropTech Theoretical overview

Digitalisation has reached the Real Estate industry and the PropTech sector has long outgrown its infancy. “Technology and tech-driven changes call into question the role of Real Estate as an asset class with predictable cashflow and inherent value. The value of assets is increasingly dependent on their operators. The operators of the future will differentiate themselves through technology and focus on the needs of specific customers. The battle to preserve and enhance the value of commercial Real Estate will be a key priority for investors over the next two decades. Innovation is at the core of this battle.” [1] The idea that you can “sit” on something that is bond like, that can generate stable returns and protects you against inflation is more and more questionable.

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Connected Tenants & Disconnected Landlords

It is not necessarily that the commercial Real Estate has changed in its essence, with few exceptions, as much as the clients have changed. Your user experience of your building is going to become your brand, and it is actually the brand which is going to become the value.

Hospitality portfolios of the Real Estate industry are by far leading in creating value with user experience field. Retail portfolios have mostly been up to date with tracking and improving their user experience as well as enabling unique offers with their loyalty programs. Meanwhile commercial office portfolios are vastly lagging behind.

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Bridging the gap

 

“One of the biggest opportunities at the moment is in making smarter and faster decisions using the huge swathes of data to which real estate organisations have access. Data-driven decisions allow real estate organisations to improve in areas such as utilization of space, investment decisions and competitor analysis. As property increasingly becomes more of a service than a product, this ability will be key to real estate organisations’ survival. Critically, this doesn’t need to involve large-scale expensive solutions – it’s about taking small steps…”

KPMG Global PropTech Survey 2017

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