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Bryan Reid

Bryan Reid

Executive Director, MSCI Research

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Asian retail resilience: Have store hours affected performance?


  • Globally, industrial real estate assets have outperformed retail assets in recent years, with the gap widening as e-commerce growth has boosted the industrial sector while weighing on retail returns.
  • The trend has been most pronounced in Western markets, but less notably in Asia, where several factors (from macroeconomic fundamentals to differences in retail culture) have potentially led to a more resilient retail performance.
  • The divergence between Western and Asian markets highlights how nuanced real estate can be and why investors may look beyond headline trends to better understand their portfolio exposures.

As technology and consumer behaviors have evolved, real estate investors have increasingly faced a widening performance gap between their retail and industrial exposures — particularly in markets such as the U.K., U.S., France, Canada and Australia. Notably, though, in parts of Asia, retail assets have outperformed industrial assets. While there are numerous factors that could have contributed to this trend, could something as mundane as differences in retail trading hours have played a role in this divergence? Possibly, but there is a large range of factors that are probably at play — from broad macroeconomic trends to differences in retail culture and the way people use shopping centers. Looking beyond headline trends can therefore be important for investors wanting to better understand their real estate exposures.


Asian retail-industrial spread bucks global trend



The picture was different a few years ago

For the first 10 years of the MSCI Global Annual Property Index, retail assets showed an annualized 8.7% total return, almost 200 basis points above what industrial assets achieved. However, from 2011 through 2018, the retail sector consistently underperformed the industrial sector in the index, and the gap steadily widened during that time. By 2018, the difference in annual total returns was almost 10 percentage points. The trend was more pronounced in some countries than in others, but occurred in most developed markets and became more visible in the last couple of years of our analysis period, as we can see in the exhibit above. However, what is notable is that retail returns for the MSCI Asia Annual Property Index continued to outpace industrial returns during that time.


Shifting market dynamics

E-commerce growth has benefited the industrial sector thanks to the stronger demand it has created for warehousing and distribution assets. These tailwinds have helped the industrial sector outperform the overall index for most of the decade. On the flipside, increasing online competition, coupled with low wage growth and high debt levels have been worrying retailers, and by extension retail landlords, for some time. Taken together, it is therefore not surprising that we have seen retail and industrial returns drifting apart.


But why has Asia seemingly been more resilient?

Different macroeconomic and local real estate market conditions may have played a part. For example, better wage growth, lower debt levels and a growing middle class in parts of Asia could have been less of a drag on retail spending growth. However, it is also possible that factors like differences in retail culture and the way people use shopping centers have played a role.

It has been reported that some Asian malls have been ahead of the curve in creating experience-rich retail environments. However malls in parts of Asia may also be benefiting from other tailwinds. For example, in tropical regions, the presence of air-conditioning could be a draw. On a more speculative level, even late shop-opening hours might have played a part, by offering more opportunity to shop, eat and socialize after work, reducing the appeal of online retail and helping make Asian retail assets less vulnerable (by contrast, in certain Western markets, more constrained opening hours that limit the average worker’s ability to shop during the week might have contributed to the increased relative attractiveness of online competition and helped put additional pressure on retail markets).

Ultimately, there is probably a complex set of factors that have helped to shape the divergence we have seen, and how much impact different individual factors have had is hard to prove. However, the fact that Asia’s retail performance has remained more resilient highlights how real estate remains a nuanced asset class where it may be important to look beyond headline trends to fully understand a portfolio.



1Libraries, Gardens, Museums. Oh, and a Clothing Store.” New York Times, Nov. 19, 2018.

2Amazon in Asia faces hurdle from air conditioned malls.” Australian Financial Review, Oct. 9, 2017.



Further Reading

2019 emerging real estate trends

MSCI real estate research snapshot

Industrial in the limelight: Secular shift or cyclical rotation?

Retail apocalypse: Should mall owners be worried?