Schroders: Is APAC retail real estate now attractive?

At a time when global stock markets are rediscovering the appeal of value overgrowth, it makes sense to ask whether the neglected Asia Pacific (APAC) retail real estate sector now looks attractive. In particular, the operating strengths and modest valuations in neighborhood retail centers in general and in Australia, according to Schroders.

The retail real estate sector has fallen out of favor with investors over the past several years, both globally and in APAC. The causes of this loss of popularity are well-known and structural, not cyclical. They include overbuilding of retail space in many markets, excessive reliance by shopping centers on fashion and other discretionary categories, and rapid growth in e-commerce. Lockdowns during the COVID-19 pandemic dealt an additional blow to the sector.

The deterioration in APAC retail markets has been reflected in falling rents for retail real estate. The most extreme case is Hong Kong, where average prime retail rents were b