Retail establishments are in trouble. Brick-and-mortar shops are closing right and left; giving way to the mecca of online shopping. Will the change in the retail landscape negatively impact real estate investors and landlords? How can these entrepreneurs run their businesses and properties to prepare for the doomed state of retail?
News headlines cover stories about the, “retail bubble bursting.” The Atlantic has called the way that the U.S. retail industry and property market is in dire straights, “The Great Retail Apocalypse of 2017.” Did you know that the United States has ten times more shopping mall space per person than countries like Germany or the UK? Consumers have already shifted to shopping online. I do not even travel to get groceries anymore! I have them delivered through an app. It saves me money, and the most important thing— “time.” People are spending more money on experiences and ways to save time; as opposed to possessions. With all the store closures, how will landlords be affected?
The effect on employment
So many jobs will be replaced by the change in retail establishments. The workforce of retail employees is the largest group in the country, and all of those people, may not be able to find alternate employment within close proximity. Others will have to train in a new skill set. Landlords could face the need to evict tenants if they can no longer pay rent on time. One alternative is to pursue real estate investing themselves to avoid losing their housing or Airbnb a room to bring in some additional income.
When large commercial buildings go vacant an area’s value is lowered considerably. When you go to look at homes, if you see that the neighborhood corner strip mall is all boarded up, it doesn’t give a great impression of the area. The overall desire simply goes down.
Converting unused retail spaces
Commercial property owners are learning to be creative with vacant (or low traffic) retail spaces. Many are using the spaces for experiential events. Owners realize that if they can get people into a space, they will probably buy from the shops. By investing in events and experiences, it keeps the traffic coming. The more popular approach seen throughout the country is developing commercial property for mixed used purposes. Old malls are now being changed up to include both shopping and living space. With people residing in the immediate area, retail purchasing will naturally increase.
How people shop
The main insight from these retail trends is the noticeable change in the manner that people shop for EVERYTHING. “Everything” includes how people buy rental property and find homes. Smart real estate investors are already beating the curve. Individuals that know what to look for in real estate investing will search for deals online. They will advertise online and engage in digital marketing.
Overall, the way business is done 2017 is being disrupted due to rapid changes in consumer behavior. Those that look ahead have figured this out and are making the necessary adjustments to stay successful. It would be a smart move for real estate investors to camp out in residential real estate markets that have solid commercial properties close. Whatever choice is made, it’s always important to stay ahead of the trends and be conservative with your numbers.