Compared to 20 years ago, the current commercial real estate (CRE) market looks pretty grim. With the rise of e-commerce and virtual storefronts, many brick-and-mortar retail locations have decided it's easier and cheaper to close their doors and take the leap into online sales. New retailers are bypassing the CRE game completely, choosing to go fully digital from the start.
What does this mean for CRE investors? It may sound like all doom and gloom, but there are plenty of big opportunities for commercial property owners — if you know where the market is headed. We asked a panel of Forbes Real Estate Council members for their predictions about the changing CRE industry.
1. It's All About Relevancy And Meeting Customer Needs
The retailers that are closing the doors are the ones that are no longer relevant to their customers. The retailers that are listening to their customers are thriving. Stay in touch with how tenants are meeting the surrounding area's needs. If they are struggling, find strategic, creative ways to allow them to exit and fill their spaces with a concept that more closely aligns with the trade area. - Jill Szymanski, Bar Louie
2. CRE Investors Should Transition Into Residential
It is my honest opinion that companies like Amazon and WeWork are going to be the end of commercial real estate as we know it today. Still, people need a roof over their head, so commercial real estate investors should transition into larger multifamily properties that are within close proximity to large employers. - Engelo Rumora, List'n Sell Realty
3. Commercial Investors Need to Focus on Warehouse/Retail Combos
The retail companies that have been successful and continue to be are the companies that have a warehouse shopping experience. Take, for example, Sam’s Club, Costco or IKEA. Investing in warehouses that are located in areas where people would normally shop is a win-win for a retail company trying to save cost on their overhead and for the commercial investor. - Angela Yaun, Day Realty Group
4. People Want To Live, Work And Play In The Same Space
The increased desire for urban living has generated an opportunity to mixed-use town center developments. Many of them have residential apartments, high rise commercial, hospitality, entertainment and scattered retail throughout the main street town center. It brings the work, live and play concept to suburbia. - Gary Isenberg, LW Hospitality Advisors
5. Vacant Retail Spaces Should Be Transitioned Into Housing
It's a blessing in disguise for housing. The retail centers in trouble are mostly zoned for potential mixed-uses and housing is preferable to vacant commercial strips. It's a huge opportunity for CRE investment professionals who can help deliver the needed product, especially when brick-and-mortar retail is in a unique context, one that didn't exist 20 years ago. - Ari Afshar, Compass
6. Innovative Retailers That Marry E-Commerce With Brick-And-Mortar Will Thrive
CRE is still one of the best investment opportunities and not going anywhere, but it will look different. The retail sector is continuing to change and if you are not innovative, you will become a dinosaur in today's market. Online sales still remain low among retail transactions, and several e-commerce stores, like Amazon, are opening more brick-and-mortar locations. - Pamela J. J Goodwin, Goodwin Commercial
7. Explore Ways To Repurpose Existing Space
Retail space owners are the most proactive group of owners on the planet, as they implement action plans to make their assets relevant by combining office/living and shopping space, and by re-branding the “shopping mall” into entertainment centers. Repurposing existing retail space into functional use in today’s marketplace will allow engaged owners to thrive. - Marc Rutzen, Enodo Inc
