MHD INDUSTRIAL PROPERTY
BLURRING THE LINE BETWEEN RETAIL AND LOGISTICS Christine Miller, Head of Supply Chain Advisory – Pacific at CBRE explores the possibilities of converting shopping centres into hybrid centres for retail and last mile fulfilment.
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hristine Miller, Head of Supply Chain Advisory – Pacific at CBRE says a conceptual shift is taking place among some pioneering investors and landlords, whereby “the distinction between a retail asset and an industrial asset is starting to blur.” She elaborates that the notion of “mixed use assets” as a category may be expanding to encompass novel combinations of retail and logistics uses for assets, in particular the possibility of converting or combining retail shopping centres to incorporate distribution – particularly for the last mile. “That blurring of distinction is really happening because, as soon as you fulfil an online order from a retail store, that retail store just became part of your logistics network,” Christine says. A re-thinking of the nexus between retail shops and supply chain distribution
The COVID-19 pandemic has further linked retail shops and supply chain distribution.
24 | MHD NOVEMBER 2021
has been pushed front-of-mind because of the COVID-19 pandemic. “As an asset class, retail shopping centres struggled most under pandemic conditions,” she says. “If we look at a graph that shows their capital value index, shopping centres would definitely show a decline since the end of 2019. Naturally, owing to the pandemic we saw offices close, and we saw retail stores close. Conversely, industrial and logistics assets were really the heartbeat of so many retailers and other businesses because they were allowed to continue operations. Those that could react quickly to pull inventory back from retail stores and into warehouses to fulfil orders online were the players with an advantage.” In addition to the closure of retail stores, those tenants that didn’t close shop often asked their landlords
for rental relief. “As an asset class, retail has had a tough go since 2020,” Christine says.
TIME FOR A HYBRID MODEL? Christine says that the pandemic jumped e-commerce growth five years ahead in just 12 months. The latest figures show 14 percent of total retail sales are online, and this figure will rise to 20 per cent by 2025, she says. “There is no doubt that a permanent shift in consumer behaviour has occurred, bringing consumers online that previously would have preferred to maintain a physical connection to their retail experience,” Christine says. “No doubt – when we’re out of these lockdowns some of that will return – because people enjoy ‘retail therapy’ and the physical and social experience of shopping.” That sense of human connection means that in-person retail isn’t going away, but it does beg the question of how best to utilise retail stores in the future. “I think there is a real opportunity for landlords and tenants to consider a hybrid model that combines the human touch of personal service with the capacity to fulfil e-commerce orders from retail,” she says. “We know that 28 per cent of the cost of transporting a good is in the last mile. So, if retailers can use their store networks or urban locations to fulfil online orders, they’re actually able to despatch products more efficiently than from a warehouse on the outskirts of town – given shoppers’ usual proximity to where they do their retail shopping.” But while there are clear savings in terms of transport, Christine cautions
