Amazon Looms, Yet Money is Still Pouring Into Malls

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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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. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.


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