Many Retail Stores Closing! What Happens Next?

[Derek Persuit]

We're beginning to hear from all over that retail stores are closing and at a very high rate. Amazon and online shopping alike has made it convenient and easy for us to do a one stop shop for things from groceries to shoes then golf clubs, a book and furniture in less than 15 minutes without walking or driving anywhere. Due to this change in retail we have seen large stores begin to close.

First and most notably we saw Blockbuster video a few years ago. Now it has moved onto department and stores like JC Penny, Payless, RadioShack, and much more.

Because of this there is a great number of commercial property without occupants. There will be more casualties along the way as the move toward online sales continues.

My question to everyone is, 'what will happen to these properties?' Surely it will be hard for businesses coming into these properties to keep up with the rate of companies pulling out.

What are your thoughts on what happens to these properties and their owners?

If you had a commercial property like this or do, what would your strategy be from here on out?

Any and all thoughts on the subject are welcome and encouraged!!

[Joel Owens]

Media fodder.

I look at over 1 THOUSAND properties a week for retail with my clients. I can say on my experience that these stories coming out is the media running with a snippet to perpetuate news.

Imparting fear into people sells stories for news agencies and gets eyeballs interested in reading the stories agencies are selling.

I have commented in other areas of this forum about retail in depth. When the Blockbusters went out retail developers LOVED it! Locations were very desirable in a lot of situations and easily re-purposed  for higher values. Example one property I saw became a bank and a dentist office side by side with national tenants.

Just like any asset class some tenants will not make it for projects. That is the SAME for multifamily or any other asset class. There will be properties that for one reason or another have constant issues with them and hard to keep performing.

Internet makes up about 10% of all retail sales currently. The younger generation is getting more of a (down to earth look) now and having earphones, shoes, other tech gear (phones) be the fashion statement. So a lot of clothes are bought online now for cheaper as it is an afterthought. These clothing places have been going out for awhile.

The mention of Kmart and larger spaces most of my clients do not buy as those do take awhile to find a tenant again for. I have seen some become self storage, some workout gyms, some garden centers, some antique stores etc.

My clients tend to buy retail centers with internet resistant tenants for mix like doctor, nail salon, hair salon, karate school, gym, restaurant,etc.

The sky isn't falling in retail. I get inquiries daily to buy these properties and spend millions of dollars down. Like anything you have to get with an expert who knows the markets and knows what to underwrite for in risk factors. That can make the difference between having a winning property years later or a loser where the buyer has lost their down payment equity by over paying for a property in a substandard location with a bad tenant mix. For retail you need to own good dirt unless you bought the building for next to nothing and you can cash flow with mom and pop retail tenants at warehouse per sq ft leasing rates built in.