The Death of a Retail Real Estate Investment
Retail real estate investment focused for many years on the development and exploitation of expanding retail sales dollars into commercial real estate properties, “Malls”. This investment category was dominated by very large concentrations of investments and expectations of returns by financial entities such as pension funds and REITs.
This Real Estate category has been killed by Aliens.
Even before Covid-19 hit, the category was already recognized as dying as early as 2019 —
During 2020 expectations for the category fell even further as the implications of the pandemic became clear — https://www.cnbc.com/2020/04/29/50percent-of-all-these-malls-forecast-to-close-by-2021-green-street-advisors-says.html The current view of mall performance remains negative.
“Every commercial property sector in Green Street’s CPPI is valued above the pre-GFC, 2007 benchmark of 100, except one: Malls, which stand at 80.3. The Mall sector CPPI index is down 17% post-Covid. There is a growing consensus that the best option for low-end malls is to be redeveloped into almost anything else.”
Demographic and technological factors certainly play a role, but Aliens have taken advantage of those shifts.
In our next post, we’ll talk about how our example Alien, Amazon, is vacuuming up the money these Malls used to generate.
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