The growth of ecommerce and online sales is prompting retail real estate investors to broaden their definition of the asset class, according to Andrea Orlandi, the European head of the Canadian Pension Plan Investment Board (CPPIB).
Speaking during a panel discussion at the annual ICSC conference in Milan on Tuesday, Orlandi said warehouses were making inroads into the traditional domain of retail property. 'Logistics warehousing is a quasi retail asset today. Pricing in the logistics warehousing sector has started to reflect that.'
Commenting on the availability of retail real estate in Europe, Orlandi conceded that the buyers market today was dominated by large sovereign funds and pension schemes like CPPIB itself. Moreover, most of these players do not intend to trade their assets any time soon.
'The supply of large dominant shopping centres is becoming smaller and that will have implications for the wider market,’ he said. ‘But,’ he added, ‘investors are dynamic and will adjust to the new reality.'
One possible strategic approach that CPPIB has already embraced in Europe, is to buy a stake in successful retail landlords. 'If you can’t buy the asset you want, you could buy an interest in the company that owns it,' he said.
At present, retail accounts for approximately 60% of CPPIB's portfolio, Orlandi said. The scaleability of retail assets and the total return nature of the asset class were key attractions, he added. 'We naturally gravitate towards retail, it is by far our most important asset class in Europe.'
CPPIB will continue to accumulate retail property, he added. 'As for our existing portfolio, most of it we don’t intend to sell.'
