Landlord profits under threat from online growth, Axa warns

Kasmira Jefford
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ONLINE retail sales are endangering the profits of bricks and mortar stores and threatening to put commercial landlords out of business, a new report claims.

The boom in web business means investors should tread carefully before investing in physical retail sales – because there is unlikely to be a return to the heyday of store spending, says the Market Edge research paper, published by Axa yesterday.

According to Axa Real Estate’s forecasts, a whopping 90 per cent of future growth in retail sales in the UK, France and Germany from 2012 to 2016 – around €91.5bn (£79bn) – will be captured by online spending. And it warns that investors have so far been unable to spot the weakening of physical sales due to the shift online because they have blamed the recession.

Axa believes current predictions that 25 per cent of total UK retail sales may be captured online by 2020 are understated, with the figure more likely to be 30 per cent.

Alan Patterson, global head of research said: “[These] conclusions not mean that retail as a sector is a poor investment, but investors need to consider very carefully whether the medium–to-long term risks associated from expanding online retail sales are appropriately priced into the assets that they are buying.”