Friends! What would happen if ..... kinda scary

Specialist · OverTheRainbow · Member since 2020 · 607 posts · 909 votes

6y

Originally posted by @Daman Gandhi:

Hello everyone !

I was just going through an article which showed data of how quickly the trends have been changing lately . Massive growth in the e-commerce sector . Decrease in offline sales and with less number of people reffering to offline shopping huge impact on commercial real estate which includes shops , malls etc . Data shows 30% of malls will shut down in the coming years. So i was wondering what would happen from 10-20 years from now will commercial real estate loose its value and with losing value come decline in the rental return . Many business would still require physical space to run which are service based but still a huge amount of space will left vacant and supply will of commercial real estate will increase and demand will decline. Yes! Many commercial land would still be converted into something else but unfortunately would not produce the same return, right? Is it a safe strategy to proceed a career in commercial rental real estate ?

Please i would really like to hear from you guys as you can provide me with appropriate knowledge .

Whats your take on this ?

Commercial real estate is kind of like investing in a buggy whip factory when the automobile is going into mass production. Too little, too late, wrong direction.

There will always be a need for housing though.

0 Reply

Ujwal Velagapudi

Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes

6y

I had primarily invested exclusively in commercial retail, office, or light industrial. I loved it but have seen the writing on the wall over the years and divested last year while things were still hot. I think retail will die out, and office space's decline will be expedited as a result of COVID and employers realizing that they can still have a productive workforce with remote workers. This will inevitably drive down demand, prices, and value for these asset types. Even if some are re-purposed, I don't think it can be enough to salvage the amount of vacant buildings we already have today. E-commerce is huge. I think we've seen in the past two months that with delivery services and online retail, there is no need for you to ever step outside of your home. Also, I think it will be a massive undertaking for certain retail to be repurposed, especially the smaller investors with tiny strips. Office may be a bit easier.

I definitely would not want to own any commercial retail/office today, as I don't have a great solution for them yet, but I can bet the person who figures out how to best repurpose them into a valuable asset again will make a fortune.

1 Reply

Zach Quick

Investor · Bentonville, AR · Member since 2014 · 759 posts · 379 votes

6y

Originally posted by @Account Closed:

Originally posted by @Daman Gandhi:

Hello everyone !

I was just going through an article which showed data of how quickly the trends have been changing lately . Massive growth in the e-commerce sector . Decrease in offline sales and with less number of people reffering to offline shopping huge impact on commercial real estate which includes shops , malls etc . Data shows 30% of malls will shut down in the coming years. So i was wondering what would happen from 10-20 years from now will commercial real estate loose its value and with losing value come decline in the rental return . Many business would still require physical space to run which are service based but still a huge amount of space will left vacant and supply will of commercial real estate will increase and demand will decline. Yes! Many commercial land would still be converted into something else but unfortunately would not produce the same return, right? Is it a safe strategy to proceed a career in commercial rental real estate ?

Please i would really like to hear from you guys as you can provide me with appropriate knowledge .

Whats your take on this ?

Commercial real estate is kind of like investing in a buggy whip factory when the automobile is going into mass production. Too little, too late, wrong direction.

There will always be a need for housing though.

Interesting wide generalization of a take. Certain mall's in particular I could see the statement being made, but I can't say I'd agree with 'commercial' falling into that.

0 Reply

George W.

Investor · NJ · Member since 2018 · 869 posts · 921 votes

6y

Big commercial land will be replaced by big warehouses in some areas. Seen it happen off the NJ turnpike and rt130 during my lifetime already.

I dont think commercial property will ever disappear completely. There will always be a need for it. It just may change different than what we know in the past.

1 Reply

Ronald RohdePro Member

Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes

6y

Originally posted by @Ujwal Velagapudi:

I had primarily invested exclusively in commercial retail, office, or light industrial. I loved it but have seen the writing on the wall over the years and divested last year while things were still hot. I think retail will die out, and office space's decline will be expedited as a result of COVID and employers realizing that they can still have a productive workforce with remote workers. This will inevitably drive down demand, prices, and value for these asset types. Even if some are re-purposed, I don't think it can be enough to salvage the amount of vacant buildings we already have today. E-commerce is huge. I think we've seen in the past two months that with delivery services and online retail, there is no need for you to ever step outside of your home. Also, I think it will be a massive undertaking for certain retail to be repurposed, especially the smaller investors with tiny strips. Office may be a bit easier.

I definitely would not want to own any commercial retail/office today, as I don't have a great solution for them yet, but I can bet the person who figures out how to best repurpose them into a valuable asset again will make a fortune.

People are already figuring it with higher end malls, outdoor walkways, they are commanding huge rents and still occupied. I think a shift to more "experience based" retail will be the result.

0 Reply

Paul Shannon

Rental Property Investor · Fishers, IN · Member since 2016 · 335 posts · 470 votes

6y

This is an interesting question. As it relates to commercial office buildings, I've thought about this. My wife has been working from home since the start of COVID. All Zoom calls, conference calls, has her two screens set-up in our office. She was commuting an hour every day downtown and an hour home.

So, if I were a CFO/COO of a company, I'd be looking at productivity. My guess is she is slightly less productive at home than in the office. However she's picking-up two hours a day by not commuting. If she therefore works 20% more productive from a time standpoint, but is 10% less productive from an efficiency standpoint, there is a net gain of 10%. Even if that was a small net loss, wouldn't it be worth it to get rid of that massive commercial lease rent payment? It also solves some of the environmental/pollution issues we are trying to solve as a society.

I think the trend long-term is going to be much less commercial office space. The unused space could be converted to residential or something else. There could be opportunity there for those that have the vision to see it.

1 Reply

Anthony Angotti

Real Estate Agent · Pittsburgh, PA · Member since 2015 · 1k+ posts · 846 votes

6y

@Daman Gandhi there will likely continue to be a need for office space, however large facilities will eventually phase out. This was happening before COVID-19, but I think this may have accelerated it. I think a lot of those facilities will be ut into smaller offices.

Same trend with retail. It was already moving away from bigger department stores in malls, but this may accelerate it.

0 Reply

Jai Reddy

Edmond, OK · Member since 2012 · 456 posts · 270 votes

6y

@Daman Gandhi

The problem is when we take a macro-economic trend of ‘more online retail than offline’, or, ‘30% of malls will be closed’, and apply it to everything which is commercial, it may not be the right approach for individual investors.

Each individual piece of commercial has to be evaluated on its on standing. For example, a corner restaurant will do well if its catering to the foot crowd of those wanting to grab lunch while they are out and about running errands. Not everyone is going to be sitting at home that exact moment and clicking on their phone to get food delivered. Yes, that restaurant better be adapted to the quick bite clientele than a grand sit-down for an hour especially in a busy part amidst a mobile crowd

There are generalizations to everything, but individual investors invest in specific real estate properties, and unless you are investing in REITs that are focused on one sector (say large retail like malls, etc), evaluate each property for its own merits and mix of tenants.

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Friends! What would happen if ..... kinda scary

Friends! What would happen if ..... kinda scary

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