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Why Abacus Property Group is changing its shopping centre strategy

Abacus Property Group (ASX: ABP) announced an asset divestment of $138 million last week and one of the asset’s sold was the Bacchus Marsh Village Shopping Centre. It was sold to a private investor for $61 million.

Bacchus Marsh, which is in regional Victoria, was sold as it does not align with Abacus’ future focus areas.

When it comes to retail, the company will now focus on inner suburban super convenience shopping centres that are close to transport hubs and have sufficient parking space.

Abacus is particularly attracted to malls that have the ability to incorporate up to three national brand supermarkets such as Woolworths Group Ltd (ASX: WOW), Coles which is owned by Wesfarmers Ltd (ASX: WES) and stores owned by Metcash Limited (ASX: MTS). This is part of the strategy that was announced in the company’s HY 2018 results presentation.

I think it’s a strategy that has been developed with the future of online shopping and the “Amazon effect” in mind. Online shopping and e-commerce are becoming more popular and that model has threatened the future of all retailers including JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN). This in turn has an impact on their landlords, the REITs.

One strategy that the REITs are implementing to combat this effect is to invest in shopping malls that are conveniently located as well as the overall customer experience. Westfield Corp Ltd (ASX: WFD) and Scentre Group (ASX: SCG) are good examples of companies that are reaping the benefits of investing into customer experience.

Abacus shareholders won’t be too worried given the company’s diversified portfolio which includes assets in the retail, office, industrial and storage categories.

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Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can follow Kevin in Twitter @KevinGandiya.

The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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