The future of retail real estate has become a big concern to many investors in commercial real estate. Others believe commercial real estate investing in retail space is as safe as it has ever been. In view of these vast differences in opinion, the most important question to ask yourself when investing in commercial property is the health of your local market and what types of retail spaces will stay strong.
Are Online Sales Killing the Brick And Mortar Industry?
Whether online sales are truly hurting the brick and mortar industry is a complex question with an equally complex answer. It is true that there have been record closures of commercial real estate in the past few years resulting from the appeal of online sales. Yet this fact only tells a portion of the story. In terms of numbers, sales in brick and mortar stores still substantially outweigh online sales, with 94% retail sales.
Still, the fast growth of online retail may leave some people who invest in commercial property wondering whether brick and mortar retail is still a good risk. The best answer to this question is that it depends on individual retail and real estate markets as well as the type of products that are in higher demand in various commercial real estate investing locations.
Can Online and Physical Retail Work Together?
Interestingly, even though online retail is expected to grow by one-third into 2018 to greater than $414 billion in sales in low contrast to the nearly $4 trillion in brick and mortar sales, many experts feel that commercial real estate investors have nothing to worry about. Even though some stores are closing, it is important to look at the reasons why.
Many big-name closures have resulted from a company’s inability to change with their consumers and adjust to changing retail trends. Other market research suggests that those involved in commercial real estate investing have nothing to fear because poor online customer service keeps many people either returning to retail stores or avoiding online purchases. The inability to actually see products in person ensures that physical retail will always be important.
Based on these things, even though there are closures and real estate owners in certain markets struggling to keep tenants, it is unlikely that all brick and mortar stores are going to close. Yet the current retail climate does demand if you are a business or buyer of commercial property reconsider if your marketing plan is catering to consumers who want physical sales more than online retail.
Online Retail Sales - Their Effect On Commercial Real Estate
Based on many studies, research shows there are some customers who prefer only shopping in physical locations and some who shop primarily online, with many doing a combination of both. Most want to browse and research online, then examine items in person to purchase on the spot.
This is especially true for things like clothing, jewelry, and expensive items. The retailers who do the best with these trends are those who have incorporated online sales with their physical sales so they compliment each other. Some brick and mortar stores not embracing these retail trends and technology are closing, while most others are simply evolving with the times.
What does this mean if you are interested in commercial real estate investing? It most importantly means that brick and mortar retail is not dying, but rather going through some changes. This also stresses the importance of knowing your local consumer and commercial real estate market and understanding what types of physical businesses have the best chance of success in spite of online competition.
Knowing this, you can choose the most favorable commercial property for sale with the understanding that it will best suit businesses that the public still wants to visit!