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February 28, 2017

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Commercial Real Estate Bubble

by Bob Schwartz

Another Real Estate Bubble?

Real Estate Bubble

Back in November 2016 I wrote an article about red flags that I saw pertaining to the United States commercial real estate market. If you missed that article here is the direct link: Real estate bubble 2017

Well, just this week I saw another red flag pertaining to the commercial real estate market. Yes, take a look at the photo  to the left. I purchased an electronic device  last Sunday from Amazon. I ordered it online about 8 o’clock in the morning on Sunday. As you can see from the bag, the online order form showed that it would be delivered between 12 and 2 PM  (actually arrived at 12:30 PM) the same day. Now, as a prime member, there was no additional cost for this super quick delivery service.

I didn’t realize it at first, but the experience was so easy and so fast, I now believe that this is a definite danger for the large shopping malls. My article  about the real estate bubble that I posted in November 2016 was about real estate limited partnerships (REITS) many of which invest in all types of commercial shopping centers and strip malls. So, for me personally, and I would venture to say probably quite a few other people, when ordering online, not only do you have the convenience and a very competitive price,  but think of the time saved from having to go to the mall, find a parking space, fight the crowds and finally waiting at the checkout line before heading back home. Therefore, I really believe that this fast shipping service that Amazon has incorporated and I understand some other big online  merchants are looking into, is going to spell big trouble  for many shopping malls and thereby the REITS that invest in them.

Another Real Estate Bubble?

Okay, it’s just my opinion and I’m sure many will disagree with me. But, consider this, just last week  the headlines on-line  reported that Sears and Kmart  are going to be closing approximately 150 stores each! Also last week, Macy’s said that it would be closing 68 of their stores! Don’t you think their sales numbers and top advisers are telling them that the handwriting is on the wall? In order to survive, they are trimming down their branches in order to concentrate just on the top producing locations.

Now, just like any major trend, I don’t think this is going to happen overnight. I equate this trend to be very similar to the cellular phone phenomenon. Just last year, I got rid of my phone landline and now just have my cell phone. Also, last year I cut off my Internet TV service. I now have a high-tech indoor antenna for picking up the local stations and watch my movies  through Netflix and HBO on the Net.

From what I read, I’m not alone in making these lifestyle decisions. Technology is really changing our lives and when it comes to real estate, well, at least commercial real estate,  I think this  could be very bad for all the folks who are investing in REITS in the belief that they are a sure bet  for a good return at very low risk. Personally, if you like to invest in real estate I would suggest staying with single-family homes, or REITS that invest in health care related projects.

Okay, now the disclaimer . . . These are just my personal opinions/insights and before making any investment decision whether to buy or sell, definitely consult with your own personal legal, real estate and financial advisors.

 

Real Estate Bubble

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1 Comment Post a comment
  1. Mar 3 2017

    It looks like you may be ahead of the crowd because this trend of people shopping online is only increasing!

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