Amazon Looms, Yet Money is Still Pouring Into Malls

Amazon

Online retail is killing bricks-and-mortar. Amazon.com, Inc. [NASDAQ:AMZN] and other online retailers have the cost advantage. They offer products at a higher discount and ship to almost anywhere in the world.

As a result, US bricks-and-mortar retailers are starving. Stores are closing down and many are now filing for bankruptcy.

And now, Amazon is coming to Australia. It will destroy Aussie retail by eroding traditional retailers’ margins. It’s why some investors are getting out now, while they can.

But if online retail is so devastating to bricks-and-mortar, why are developers pouring millions into malls?

As reported by Bloomberg:

Across the country, construction spending on shopping centres topped $1.6 billion in June, the largest amount since 2008 and the Great Recession. Builders have been especially busy working on malls, spending $404 million in April. In nominal terms, that’s the second highest monthly total ever according to Census data, coming in behind July 2008.

Amazon

Source: Bloomberg

To be fair, total spending isn’t just going into new construction. Some of it is used to update exiting malls to draw more foot traffic. The figures are also higher thanks to inflation of land prices and labour costs.

However, I believe it shows the age of bricks-and-mortar is far from over. While we are increasingly spending more online, the instore experience still cannot be beat.

Regards,

Härje Ronngard,

Junior Analyst, Markets & Money

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Härje Ronngard

Härje Ronngard

Harje Ronngard is a Junior Analyst at Markets and Money.

With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation.  

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