Guest editorial

Citation

Ooi, J. and Faishal Ibrahim, M. (2007), "Guest editorial", Journal of Property Investment & Finance, Vol. 25 No. 2. https://doi.org/10.1108/jpif.2007.11225baa.001

Guest editorial

The retail property market has seen tremendous changes over the past few decades. The proliferation of malls outside the traditional shopping belt, with their tenant mix of customary retail shops, entertainment outlets, cinemas, public library, and food courts, has significantly altered the community’s lifestyle. Indeed, shopping centres have become more than a retail place; having evolved from their traditional role of providing conducive environment to facilitate buying and selling of goods and services to that of providing an entertaining experience for the patrons. Shopping centres constantly need to reinvent themselves to stay relevant in an increasingly competitive market and changing consumer demands. The increasing globalisation and securitisation of real estate will also impact the flow of investments into the retail sector, which has generally outperformed the office sector on a risk-adjusted basis. This special issue of the Journal of Property Investment & Finance on Retail Property contains five papers covering the retail property scene in Europe, Australia, Hong Kong and Singapore.

The first paper by Ooi and Sim addresses two questions related to the magnetism or drawing power of suburban malls: first, does physical size matter, and second, what is the externalities effect of housing a Cineplex within a shopping centre? The survey results covering 1,283 shoppers in Singapore confirm that both physical size and presence of a Cineplex enhance the magnetism of suburban shopping centres. A larger shopping centre can facilitate a greater variety of shops and create a more pleasant environment for the shoppers, thus enticing shoppers to visit and stay longer. Cinema patrons prefer to watch movies at Cineplex located in shopping centres. However, after controlling for the endogenous relationship between duration of visit and amount spent in the shopping centre, the empirical results show that whilst physical size and Cineplex have a positive effect on the duration of visit, they do not necessarily have a direct effect on the amount spent by the patrons in the shopping centre.

Moving on the retail scene in Hong Kong, the paper by Hui, Yiu and Yau examines the relationship between market positioning and rents of 151 retail properties owned by Link real estate investment trust (REIT), which is the first REIT to be launched in the Chinese territory. The sampled properties are divided into three categories based on their market positioning: district centres which have more than 10,000 m² retail space, local centres with between 5,000 m² and 10,000 m² and estate centres with less than 5,000 m² retail space. Their regression analysis indicates that district centres command the highest average rental, followed by local centres and lastly, estate centres. The result is consistent with the hypothesis that retail facilities positioned to have larger catchment areas and more shops inside have higher overall rental income, holding other things constant. In other words, the size of a retail outlet has a positive influence on rental rate.

Retail property is an important property investment sector. Two papers in this special issue review the strategic role of both direct and indirect retail property in a mixed-asset portfolio. Newell and Peng analyses the performance of retail property in Australia over 1995-2005. They observe that retail property and retail listed property trusts (LPTs) have delivered substantial risk-adjusted returns as well as portfolio diversification benefits. Direct retail property and retail LPTs have different performance characteristics with each contributing substantially to an institutional property investment strategy. The study also finds that geographic diversification is the most effective portfolio diversification strategy for retail property investors. In Europe, retail has tended to outperform offices over fairly long time horizons. Skinner, therefore, suggests that at a strategic level, investors in mainland European real estate should diversify away from offices by raising allocations to other sectors. Noting that improved asset and fund management infrastructure has made retail property more accessible to investors, he anticipates that retail property will be a major beneficiary of this secular shift.

The last paper by Ho employs a system dynamics approach and econometric analysis to model the ex ante capital values of prime retail in Singapore. Through a rigorous expectations-cantered system dynamics model for rents, cost, retail stock, general demand and exogenous factors, the paper provides a good appreciation of the price discovery process in the retail property market. The main policy implication derives from the system dynamic model is a need for a more transparent system of sharing rental and pricing information in the retail real estate sector.

Joseph Ooi, Muhammad Faishal IbrahimGuest Editors