Is e-commerce an investment risk priced by retail real estate investors? An investigation

ABSTRACT Over the last 20 years, online shopping has evolved into a major threat to the physical retail store. We investigate whether retail real estate investors price e-commerce as an investment risk. In particular, we analyse whether e-commerce sales have informative value for retail real estate returns. Focusing on institutional-grade shopping centres over the period of 2000 to 2018, we find that e-commerce sales predict total returns in the next quarter. This effect is driven by capital returns, which suggests that e-commerce is indeed priced as an investment risk. While consistent across mall types, this effect is stronger for regional and super-regional malls than neighbourhood and community shopping centres. Explanations for this difference include the types of retail tenants in these different mall categories and the varying impact of e-commerce on their business.