Retail Real Estate is Dead

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We are in Transition

Being in real estate, we all know the value of residential and multifamily real estate. The cash-on-cash returns can be great and can provide wealth for generations to come. With that said, what about commercial real estate, specifically retail? I feel we are in a transition period in the United States where there is a lot of questions to be answered by the future. With technology becoming so advanced to the instant gig-economy, where does that leave retail real estate?

Times are Changing

The world is changing, and we must first admit that. We are in an economy where we hit a button and get picked up by some stranger and taken to our destination. We can open up an app and get a mortgage, and no, I’m not kidding. I thought this was a joke until last week where I heard actual friends of mine actually doing it. We have come to a place where people do not want to stand in line anymore for food during their lunch break. They tap a button in an app and the food comes to them. App based food delivery services are booming everywhere. Amazon has taken it a step further and also deliver fresh groceries to your doorstep with a touch of a button. Back in the day, the first thing you looked for when you opened a new business was office space. Nowadays home based businesses are booming everywhere. With virtual assistants and temporary office spaces provided, small businesses simply don’t need a physical office anymore. 80% of business can be done though a cell phone on a golf course and the rest at the dinner table with your client. Offices are becoming obsolete. Times are changing, and we must open our eyes to that.

Retail Real Estate is Dead

So where does that leave retail spaces and commercial real estate. Well JCpenny’s and Sears have been slowly going bankrupt, while Macys has been closing 40 stores every 6 months. The future is not looking bright at all for these types of properties. The one bright side I see is service related businesses are staying around. What I mean by that is barbers, nail places, beauty salons, and other service related businesses are staying in retail spaces. Personally there is only so much time before the next uber-like app for barbers and hair stylist comes around where they go door-to-door like an on demand business.

So if thinking about retail space, think again. Be careful, and always consider the future.