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Alternative Market Briefing

E-commerce effect pushes retail-focused real estate fundraising into an existential crisis

Friday, February 14, 2020

Laxman Pai, Opalesque Asia:

The aggregate value of retail private equity real estate (PERE) deals has declined since 2017. In fact, 2017 was a record year for retail, with deals amounting to an aggregate $58bn; since then, however, the sector has observed a dramatic decline in deal-making, recording $32bn in aggregate deal value for 2019.

According to a Preqin report, a combination of sustained growth in e-commerce, changes in consumer behavior, and rapid technological advancement has disrupted and reshaped the retail industry that once was dominated by the high street.

The number of physical stores faces ongoing decline as consumers increasingly prefer to shop from the comfort and convenience of their own homes. In turn, private retail investment has been affected, the report said.

Fundraising in retail-focused real estate has also suffered. The number of real estate funds closing each year that are focused exclusively on retail has been declining since 2016, falling from 41 to just 14 in 2019.

In the same period, aggregate capital raised also decreased from $6.9bn to $1.7bn. Retail has been forced to contend with the rise of e-commerce; according to TechCrunch, e-commerce sales during Thanksgiving 2019 posted a 14% rise compared with Thanksgiving 20181.

The rise of e-commerce gives logistics real estate a boost

As e-commerce grows, the need for an adequate supply chain to meet demand becomes more prevalent. While PERE deals focused on retail ha......................

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