Shifting Strategy Investing In Retail Real Estate

The retail industry is going through a time of convulsions as large retailers react retail oversupply and the growth of online shopping. Likewise, the retail real estate market is reinventing itself and flexing through the changes. This confluence of instability and great change is a nexus of opportunity. If you position yourself right, you have a chance to reap great rewards in retail real estate investing.

Pros and Cons of Investing in Retail Real Estate

Investing in retail real estate is not for everyone. There are some significant pros and cons that are associated with the retail industry in general and investing in commercial real estate in particular. The retail industry is broad and includes storefronts, malls, strip malls, restaurants, and entertainment locations.

The potential for high investment returns leads the pack when it comes to the benefits. In growth areas, it’s not unusual for retail space to become available through the natural cycle of businesses. The right investor can snap up those retail properties at a discount and either sell them for a profit or lease them out for residual income. Rental income is the second pro for real estate investing. It’s income that comes in each month. It pays for expenses and provides a profit in addition to real estate appreciation.

There is one major downside if you get involved in a retail real estate investment property. The biggest problem is that the US has too much retail space. On a per capita basis, the US has almost 50% more retail space as the second place country Canada. The retail space supply is not evenly spread across the US. Areas where retail space has increased significantly faster than buying power are particularly at risk of falling retail real estate values.

Where to Invest in Retail Real Estate

The best places to invest in retail real estate are in those areas where the buying power is increasing faster than the square footage of retail space. The greater the difference, the greater future opportunities there will be. It’s not a hard and fast rule though. There might be significant opportunities even in areas with decreasing buying power. Even in areas of general declining growth, there are areas where growth is still occurring.