Retail property is commercial real estate zoned and used for selling consumer goods and services. In addition to shops, a retail property might also include space for restaurants and offices.
Retail space ranges from single-tenant buildings to neighborhood shopping centers to large shopping malls.
Benefits and risks of retail property investment
Australian commercial real estate site RealCommercial notes that investors can benefit from retail property’s high yields, long leases and low maintenance costs. Still, it can be a risky investment, particularly during an economic downturn. Many consider this class of real estate to be most attractive during economic expansions.
One risk inherent in retail property is that its value is highly sensitive to location. That’s not unusual in real estate, of course, but retail space’s sensitivity to changes in the neighborhood is particularly acute. Altered mass transit routes or extensive road repair could make the property difficult for shoppers to visit. Also, if one of a mall’s larger tenants — an “anchor store” — should decide not to renew its lease, that makes the property less attractive for other retailers to rent.
Another risk inherent in retail property investment is technology. The internet has dramatically buying habits, and the population as a whole requires less space for brick-and-mortar shopping. It might be a long time, if ever, before shopping malls are extinct, but it is safe to say their heyday is past. Urban shopping districts, though, are benefiting from a resurgence in the mixed-use property market.
← Back to Glossary