Offices and retail spaces

[Zaid Bender]

With all what is going on in the online business and e-commerce. There is a huge move in the product business to online sales. That will create a huge loss of business for retailers and offices spaces are getting empty day by day. It seems that in the next coming years there will be more retail and offices spaces available at lower prices. What do you think?

Thanks,

Dr. Bender

[Tom De Napoli]

That’s a good question, Zaid, and a topic that my partner and I have been studying closely for the past year.   The short answer is that yes, certain categories of retail such as apparel, consumer electronics and department stores, which are vulnerable to eCommerce, have been hit harder than others.  As a result the shopping malls and lifestyle centers that rely on these types of tenants are suffering. It’s going to require owners and institutional investors with vision, patience and very deep pockets to reposition these types of properties.  

However, for entrepreneurial, independent investors among the Bigger Pockets community, we believe there is opportunity to be found in other segments of retail properties that are eCommerce resistant, such as neighborhood strip centers that offer services which can’t easily be replicated online such as hair & nail salons, fast food, medical offices, etc.  Depending on the submarket, many of these properties offer significantly higher Cap Rates than multifamily or industrial - both of which are arguably overheated asset types at the moment - because the market incorrectly assumes that all retail is risky.

Before you invest in a strip center, the main caveat is that it requires a dramatically different skill-set to operate these types of properties so do your homework first or find an operating partner with experience.

Good luck!