Retail properties in certain markets, including Chicago, Baltimore and Salt Lake City, are less likely to be affected by e-commerce than retail real estate in cities such as Los Angeles, Las Vegas and Oklahoma City, according to a release report by MetLife Investment Management.
"We believe that although the repricing of the (retail) sector has perhaps been appropriate in overall magnitude, it has perhaps not been appropriately differentiating by geography," the report noted.
The percentage of residents regularly shopping online, 53%, in Chicago, Baltimore and Salt Lake City changed little in 2018 from the prior year.
By comparison, the 50 largest U.S. markets rose to 49% in 2018 from 44% in 2017.
"We therefore believe retail real estate in these markets is less likely to be disrupted by e-commerce, or will at least be less disrupted than the rest of the country, in the 2020s," the report concluded.
Grocery-anchored retail properties have fared the best against the ravages of the e-commerce, but the paper suggests investors should be cautious because depending on the location of the grocery-anchored centers, a move to online grocery shopping could be impact that sector as well.
"We expect that online grocery ordering in the U.S. could grow from around 2.5% of market share today to at least 7% by 2023," the paper said. "Although some of these online orders will be filled by traditional grocery stores, we expect operating costs will push most online ordering growth into cold-storage warehouses."