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Property Investors Vote on Future of Retail With Their Dollars

Real estate investors, including private equity giant Blackstone Group LP, are making big bets that industrial properties will keep gaining as retailers focus on their online operations.

(Bloomberg)—Investors in real estate are sending a strong signal about the future of retail.

Values for U.S. industrial buildings, including the warehouses that serve as distribution hubs for Amazon.com Inc. and others that sell goods online, have been wildly outperforming retail-property values for some time. A new report from Green Street Advisors LLC shows that industrial values have climbed 15 percent over the past year, the most of the 10 types of commercial real estate the research firm tracks. Over the same period, prices for malls, the worst performer, fell 12 percent.

Real estate investors, including private equity giant Blackstone Group LP, are making big bets that industrial properties will keep gaining as retailers focus on their online operations to satisfy shoppers increasingly turning to the internet. Malls have been on the losing end of this trade.

Retail landlords, spending billions of dollars to overhaul their properties with experiences that can’t be enjoyed online, such as restaurants and gyms, are working to fill empty space left by tenants like Sears Holdings Corp. and Toys “R” Us Inc. It isn’t clear whether their efforts will be enough to save the struggling retail properties these floundering retailers used to fill.

Commercial-property values overall have changed little for the past two years, after surging to records following the recession, Green Street data show.

“On average, commercial-property pricing has barely budged,” Peter Rothemund, a senior analyst at Green Street, said in a statement, “but the average masks big differences across property sectors.”

To contact the reporter on this story: Sarah Mulholland in New York at [email protected] To contact the editors responsible for this story: Daniel Taub at [email protected] Peter Jeffrey

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© 2018 Bloomberg L.P

TAGS: Industrial
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