As the American economy has shifted from the glutton-rich to bargain basement investment shoppers, so too have our priorities. A “getting back to basics” mentality is not only sweeping through every household but can be seen in how we choose to spend our money today and tomorrow both in the public and private sectors. As the pendulum moved from one end of the speculative spectrum in 2007 to the other, a financial chokehold in 2009, we can look forward to 2011 bringing us nearer to a middle-ground balance. We should be saying goodbye to the bottom.
Economists and commercial retail forecasters from various markets across the country project a better year ahead. The demand for retail space fell due to business restructuring or closing doors, leaving millions unemployed and unable to feed consumer and investor confidence indexes through retail spending. But 2010 initial fourth quarter retail spending is on the rise, drawing hope in transcending positive forecasts into reality for 2011. Notable financial experts and real estate investors responded to the Emerging Trends in Real Estate 2011 survey conducted recently by PwC US and the Urban Land Institute, “an era of less” leads to greater interest in “A” property, specifically in gateway coastal markets. The report cited Washington D.C., New York, San Francisco, Austin, and Boston as the hottest markets. What makes better sense for businesses searching for ways to enhance their bottom-line than common-sense logistics?
In today’s market more than ever, cashflow is king. For the strong at heart and the long-term hold, the major cities of Florida, Las Vegas Nevada, and Phoenix Arizona have taken the greatest beating on price point but provide more for the dollar. During the Greater Phoenix Chamber of Commerce’s Economic Outlook 2011 breakfast meeting held in the Fall of 2010, local economist Elliot D. Pollack echoed the beliefs of many in the Southwest, “The commercial real estate market is at or near bottom…the recovery will be painfully slow.” He also added that both the job growth and population growth in the greater Phoenix metropolitan area should reach 2% while retail sales should increase by 8%.
As our economic recovery coast-to-coast continues at a slow yet steady pace, look for retail vacancy rates easing. Rental rates will remain stagnant which will assist in easing the gap between Sellers’ list prices and Buyers’ less-than-savory offers. Cash Buyers will continue to fare best with the foreclosure market as lenders begin to see the properties move off their books only to be replaced by others but at a slower pace. Smart investments for the new year:
-location, location, location, central core properties with 6-7% cash flow
-leverage properties as these low mortgage rates may not be seen again
-retail centers with discount or 24-hour store to maintain and increase traffic
-buy or hold REITs
-buy land as the best deals are now but prepare to hold for awhile
Consider churches, colleges, and medical centers. Why? These enterprises offer stability and excellent opportunity for expansion as each niche brings a need. Due to recent personal adversity, more people are frequenting church. Our federal government has offered more grants and loans over the last few years so campus enrollment is up. Conversely, many colleges have a shortage in student housing. Concerns over health care are well-founded as our national needs will continue to escalate, parallel to our aging population who are living longer though not necessarily better.
For retail, 2011 provides real estate investors and businesses the chance to find a need, create the niche, and move recovery forward—now.
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